Syrian traders who price goods in foreign currency will face up to 10 years in jail, the government announced on Sunday in a move aimed at stemming the increasing dollarisation of an economy crippled by two years of civil war.

A decree issued by President Bashar al-Assad "forbids the use of anything other than the Syrian pound as payment for any type of commercial transaction or cash settlement".

Traders who violate the law face up to three years in jail and a fine equivalent to double the value of the payment. If the sum involved is over $5,000, punishment could rise to 10 years with hard labour, according to the decree published by state media.

Bankers said Sunday's move reinforced existing prohibitions on pricing goods in dollars - a law which has been increasingly flouted after sharp falls and wild fluctuation in the Syrian pound - and said the penalties had been stiffened.

"It's to prevent people from fleeing to the dollar," said one Damascus banker, adding the decree would not have an impact on banking operations.

"It does not in any way affect the banking sector - the country needs foreign currency transfers," he said. "The idea is that people don't all think in dollar terms as if there is no local currency. It's more a psychological move with the currency crumbling."

Sharp falls and fluctuations in the Syrian pound have led to increasing use of the U.S. dollar in all walks of life, by food sellers and manufacturers, taxi drivers and importers.

Before protests against Assad's rule erupted in March 2011 the pound stood at 47 to the dollar. After two years of war and economic collapse, it now changes hands for around 200, and briefly fell as low as 300 last month, exchange dealers say.

Devastation to the commercial and industrial cities of Aleppo and Homs, together with the loss of foreign currency earnings as oil exports and tourism dried up, have hit the economy hard. Damage is estimated in the tens of billions of dollars and this year's wheat crop is expected to fall by half.

The weakness and volatility of the local currency has pushed up inflation and left many shopkeepers struggling to price their goods in local currency.

"Having dollars, depositing them and using them as a currency of savings has never been outlawed but even before the crisis, dealing with dollars in domestic commercial transactions was banned," said a chief currency dealer in a Damascus bank.

"This is a law that imposes more penalties," he said. "Syrians can get transfers in dollars and importers can still price their goods in dollar but they cannot put dollar price tags on goods sold," he said. – Reuters