Reporting from Beirut — A sharp discrepancy between Syria's nose-diving economy and its relatively stable currency is fueling speculation among observers that either another country, presumably strategic oil-rich ally Iran, has injected huge amounts of cash into its economy, or Damascus is quickly draining its foreign currency reserves.
Syria's overall economy, stock market, vital tourism industry and foreign investment have collapsed, according to economists and analysts. It appears to have hemorrhaged cash, with the bulk flowing to Lebanon, which has long served as a conduit for Syrian finances.
But its currency, the Syrian pound, has held strong, staying about the same as before an uprising against President Bashar Assad began five months ago.
The disconnect between the teetering economy and the stable currency, which remains vital for keeping the country's urban merchant class a pillar of support for the regime, has baffled some observers and led to speculation about possible influxes of cash.
"You have the collapse of exports and the collapse of foreign direct investment," said a Western diplomat in Beirut who closely tracks the Syrian economy and spoke on condition of anonymity. "Given the fact that the currency has not collapsed, the indications are that money is coming in. No one knows from where, or how much."
Syria's inner workings are among the most opaque in the world. Bankers and economists attempt to draw an overall picture based on the few indicators that appear reliable in a heavily state-dominated economy.
"The problem is, what are the numbers?" said a chief economist with a Lebanese bank that has extensive business in Syria. He spoke on condition of anonymity for fear of putting colleagues in jeopardy. "I look at their balance sheets, and I cannot understand them."
Many economists and officials agree that, up until the uprising began, Syria's prospects were relatively good, with many predicting a banner year for the country thanks to an uptick in tourism, investment from Iran and the Arabian Peninsula kingdoms, and increased trade with Turkey.
But the political crisis engulfing the country has changed all that.
Syria's tiny Damascus stock market was down 41% during the first seven months of 2011, the worst performance in an Arab world racked by political unrest. Its gross domestic product, earlier projected to weather the global economic crisis and grow 3%, will instead probably shrink 5% or more. Tourism, which accounted for $4 billion annually, or 12% of its economy, has collapsed.
What's more, a flood of cash appears to have poured from the country.
According to a report issued by the Byblos Bank, headquartered in Beirut, deposits in the Syrian accounts held by Lebanese banks dropped by up to 24% by the end of April. Meanwhile, despite a political crisis that crippled the government in Lebanon, banks here reported surges in deposits: from $670 million in February to $1.34 billion in March and $1.8 billion in April, though the net increases tapered off in May and June.
Syrian officials have taken steps to stem the outflow, including raising interest rates on savings, lowering rates on lending and adding transaction fees to dollar withdrawals.
The official news agency said Monday that Syria had barred anyone from exchanging more than $3,000 worth of local money for hard currency without special permission to "put an end to manipulation in the currency market and speculation."
Syria may have also begun drawing on extensive reserves that officials said had reached $17 billion, built up over the decades to keep its currency solid and the merchant class supportive — or at least quiet about the crackdown against the protest movement.
"The mercantile-military arrangement is key to the regime's grip," said Andrew Tabler, an expert on Syria at the Washington Institute for Near East Policy and author of the forthcoming "In the Lion's Den," about Washington-Damascus relations.
"Syria doesn't produce a lot," he said. "It's a trading economy. The exchange rate is a political issue."
In Damascus, a dollar now sells for about 51 pounds on the black market and 47 pounds officially, a difference of less than 10%, which many analysts consider extraordinary. In Libya, where a civil war is raging, the local currency trades for up to 2.5 dinars per dollar on the black market, half the value the official rate of 1.25 dinars.
Other factors could be helping maintain the Syrian currency's stable rate. Remittances from abroad, which total about $1.2 billion a year, could have gone up as wealthy Syrians send cash home. Also, security forces could be forcing black market vendors to keep prices steady.
In an attempt to mute the uprising, the government has also increased public-sector salaries and presumably poured money into the security forces.
Though Syria exports $4 billion in crude oil annually, it also imports about the same in refined petroleum.
Quite simply, analysts say, the numbers don't add up. Syria's reserves are either being whittled down by between 50% and 100%, according to estimates by economists, or an outside source is injecting cash to help stabilize the Syrian currency.
Some news outlets have speculated that Iran could have pumped as much as $6 billion into Syria. But others suggest Iran is also in dire economic straits and probably has contributed no more than $1 billion.
"Syria is probably helped by a combination of an infusion of cash and savings," said Randa Slim, a scholar at the Middle East Institute in Washington. "There is a mass infusion of cash, and I don't imagine any other source other than Iran."
A special correspondent in Damascus contributed to this report.