Introduction
In a Damascus ceremony, Syria launched new banknotes that entered circulation at the start of 2026. President Ahmed al-Sharaa and Central Bank Governor Abdulkader Husrieh unveiled denominations of 10, 25, 50, 100, 200, and 500 Syrian pounds, reflecting a removal of two zeros from the old banknotes; every 100 Syrian pounds of the old currency will equal one Syrian pound of the new currency. The new notes prominently feature roses, wheat, olives, oranges, and mulberries, symbols of Syria’s national heritage. However, simply issuing banknotes with fewer zeros does not automatically increase their value or strengthen the economy. For lasting impact, such changes must be paired with broader economic reforms.
What Does “Cutting Zeros” Mean?
Cutting zeros, formally called redenomination, is the process of adjusting the face value of a currency, usually in response to high inflation that renders only large denominations practical. From a monetary perspective, redenomination does not change the currency’s exchange rate or purchasing power relative to other currencies. Its primary effect is psychological: it can signal to the public that inflation is being addressed and that authorities are attempting to restore confidence in the monetary system.
Why Did Syria Do This?
There are several reasons why Syria undertook this currency redenomination. First, fourteen years of war and conflict caused the Syrian pound to lose about 99% of its value against the U.S. dollar, the region’s most widely used benchmark for exchange rates. This dramatic depreciation has made everyday transactions cumbersome, requiring extremely large denominations and complicating both domestic trade and foreign exchange. By removing two zeros, the government aims to simplify pricing and accounting, and signal an effort to stabilize the currency, though this alone does not restore real value or address underlying economic weaknesses.
Second, estimates suggest that over 40 trillion Syrian pounds are held outside the formal financial system, including by individuals, informal traders, and potentially illicit actors. Under the new rules, these old banknotes must be exchanged within 90 days inside Syria, requiring holders to go through official channels. Large exchanges are likely to be flagged for inspection, creating a dilemma for those outside the system: either reveal themselves to authorities or risk letting their cash become worthless. This measure gives the government greater control over the money supply and may reduce the nominal amount of currency in circulation. While this could ease inflationary pressures, structural economic challenges will continue to influence the currency’s value over the long term.
Free-Floating vs. Pegged Currencies
All global currencies trade at an exchange rate, which is the price at which one currency can be exchanged for another. There are two main systems for determining this rate: fixed (or pegged) and floating. A fixed exchange rate is set by a central bank, establishing a stable value against a major currency such as the U.S. dollar or the euro. To maintain the peg, the central bank must hold sufficient reserves of the foreign currency and actively intervene in the market, buying or selling its own currency or the foreign currency as needed. Although, maintaining a peg can be costly and difficult, especially during periods of economic stress or declining foreign reserves, and it can limit a country’s ability to respond independently to domestic inflation or other economic shocks.
On the other hand, a floating exchange rate is determined by market forces, primarily supply and demand. If demand for a currency is low, its value will fall; if demand is high, its value rises. This system allows the currency to adjust automatically to economic conditions, such as changes in trade balances, inflation, or capital flows. However, in countries with weak economic fundamentals or high inflation (like Syria) a floating currency can be highly volatile, making prices less predictable and complicating trade and investment decisions. While floating rates reflect market realities, they also expose economies to sudden swings that pegged systems can help mitigate.
Syria’s Economic Context
Inflation
Inflation in Syria remains high but has moderated recently. Between March 2024 and February 2025, the general inflation rate (average year-on-year price change over the 12-month period) was 36.8%, down from 120.6% the previous year. In February 2025, annual inflation (year-on-year change for that specific month) stood at 15.2%, compared with 109.5% in February 2024, while monthly inflation (price change compared with the previous month) was -8.0%. The Central Bank of Syria attributes ongoing price increases to rising costs, which have reduced real incomes and purchasing power, though improvements in commodity supply and the exchange rate have helped slow inflation.
Foreign Reserves and Trade
In December 2024, Syrian caretaker Prime Minister Mohammad al-Bashir (now Minister of Energy), stated that the country has very low foreign currency reserves. One source stated the figure to be just around $200 million, although some estimates were higher. These limited reserves constrain the Central Bank’s ability to intervene in currency markets, stabilize the Syrian pound, and support imports of essential goods such as food, fuel, and medicine. Combined with ongoing sanctions and a large trade deficit, low reserves exacerbate economic vulnerabilities and make it difficult for Syria to maintain external stability or defend the currency against market fluctuations.
Employment and Poverty
According to a United Nations Development Programme (UNDP) report published in early 2025, 90% of Syrians live in poverty, and 25% of are unemployed (people of working age who are actively looking for work but cannot find it). It is important to note that many Syrians work in the informal economy, meaning they have jobs but earn very little; these workers are considered employed for unemployment statistics but may still live in poverty, which explains why the poverty rate is much higher than the unemployment rate.
Syria vs. Regional Currencies
It is useful to benchmark Syria’s floating exchange rate system against peers in the region. The Jordanian Dinar (JOD) is consistently in the top 5 strongest currencies in the world due to its peg with the U.S. dollar at a fixed exchange rate of 0.71 Jordanian dinars per U.S. dollar. Supported by this peg, adequate foreign reserves, and credible monetary policy, Jordan has maintained inflation at consistently low and stable levels, generally below 5% over the past two decades, as per Central Bank of Jordan data.
Similarly, the United Arab Emirates dirham, Saudi riyal, Omani rial, and Bahraini dinar are pegged to the U.S. dollar at fixed exchange rates of 3.6725 dirhams, 3.75 riyals, 0.384497 rials, and 0.376 dinars per U.S. dollar, respectively. Together, these exchange-rate arrangements have contributed to a high degree of monetary stability, making these currencies among the most predictable and least volatile in the region.
While pegged currencies offer stability and predictability, such systems require substantial foreign reserves and strong institutional credibility. By contrast, Syria’s floating exchange rate allows market forces to determine its value and grants greater monetary autonomy, but in the absence of strong economic fundamentals, it remains vulnerable to volatility.
Outlook and Implications
Syria’s removal of two zeros from its currency is best understood as an administrative and symbolic step rather than a solution to deeper economic problems. While redenomination may simplify transactions and increase state oversight of the money supply, it cannot substitute for macroeconomic stability, strong institutions, or adequate foreign reserves. Ultimately, restoring confidence in the Syrian pound will depend less on how it is denominated and more on whether meaningful economic reforms take hold.
Photo by Mahmoud Sulaiman on Unsplash
