News / Economy

    Doubt Over Syrian Steps to Control Hyperinflation

    The Syrian pound is plunging in value on the black market, trading this past week for more than 300 to a U.S. dollar.
    The Syrian pound is plunging in value on the black market, trading this past week for more than 300 to a U.S. dollar.
    The Syrian government is moving to shore up the value of its free-falling currency, imposing harsh penalties on black-market dealing in foreign currencies.
     
    Economists, however, predict the rescue effort won’t halt the currency’s plunge as evidence mounts that the war-battered Syria is now in the grip of hyperinflation.
     
    Penalties for dealing in foreign currencies include substantial fines and prison terms of up to 10 years – necessary punishments, the government said this week, to “prevent manipulation of prices in the market and curb exploitation of citizens’ needs.”
     
    But Steve Hanke, an economics professor at The Johns Hopkins University, warns the measures are unlikely to stop the currency’s free fall, or prevent Syrians anxious to protect their savings from converting them to U.S. dollars. He says the government’s rescue attempt is “futile and wrong-headed.”
     
    “This strategy proved wildly unsuccessful when it was utilized by the Iran in October of 2012 to protect its troubled currency,” he says. “People will do everything they can to get around the restrictions.”
     
    With the 28-month-long civil war and international economic sanctions wreaking havoc on the country’s economy Syrians are facing a bleak Ramadan, the Islamic holy month that started this week, as they scramble to come up with ways to pay for food and shelter.
     
    Plunging on the black market
     
    On the black market the value of the country’s currency has hit an all time low, with the exchange rate now ranging from 300 to 310 Syrian pounds to the U.S. dollar. Before the uprising began against President Bashar al-Assad’s government in March 2011, the rate was 50 pounds to the dollar.
     
    Syrian President Bashar al-Assad's government is trying to shore up the currency in the midst of a civil war.Syrian President Bashar al-Assad's government is trying to shore up the currency in the midst of a civil war.
    x
    Syrian President Bashar al-Assad's government is trying to shore up the currency in the midst of a civil war.
    Syrian President Bashar al-Assad's government is trying to shore up the currency in the midst of a civil war.
    For ordinary Syrians, just getting by has become a nearly impossible task in the face of wildly rising prices for basic goods.
     
    “My salary of 20,000 pounds doesn’t stretch enough to keep us from going hungry,” says Mustafa, a father of four and government worker in Damascus who talked with VOA by phone. “Our savings have long gone.”
     
    Hanke, an internationally noted expert on troubled currencies, says the plight of ordinary Syrians will get worse.
     
    He believes the Assad government has lost control of the official currency and that Syria has gone from suffering galloping inflation to hyperinflation. In the absence of reliable economic data from the Syrian government, Hanke bases his assertion on a set of complex economic calculations to estimate price shifts.
     
    “Syria’s implied monthly inflation rate is now 91.9 percent. This means that Syria has exceeded the threshold for hyperinflation -- an inflation rate of 50 percent per month,” he says.
     
    Hyperinflation and currency collapse
     
    The 20th century saw a total of 28 hyperinflations, nearly all caused by monetary collapse following the two world wars or the fall of communism.
     
    The most infamous case of hyperinflation was during the Weimar Republic in Germany in the 1920s, which was triggered by First World War debt. The monthly inflation rate peaked at 32,400 percent.
     
    So far his century, there has been only one other case of hyperinflation – Zimbabwe’s from 2004 to 2008. That was sparked by the government printing money to pay for a war in the Congo and then compounded by droughts and farm confiscations. The inflation rate was 98 percent a day. It ended when Zimbabweans in effect ditched the local currency and traded instead in foreign banknotes.
     
    “When you are in hyperinflation the local currency becomes in effect useless,” says Hanke. “You have to unload the local currency as quick as you can, within hours and not just days or even weeks as with inflation. In hyperinflation everything is speeded up.”
     
    In the 1990s, as a result of a civil war, Serbia witnessed a staggering hyperinflation that at its peak reached a monthly rate of 313 million percent. Efforts by the Assad government’s closest ally, Iran, to assist with credit lines and loans of billions of dollars, plus foreign assistance from Russia, is saving Syria from Serbian-style inflation. But Hanke says Assad’s allies will have to dig deeper.
     
    Crop failure
     
    “The worst case scenario is if Syria has another very bad season with agriculture. They had one last year because of a drought. And this year they have problems because the farmers aren’t getting out to the fields as much,” said Hanke.
     
    “So that would be one thing that would aggravate the hyperinflation very much. And if government expenditures are retained at high levels, you’ll end up with more obligations on the Central Bank to print money,” he said.
     
    The Assad government appears to be trying to cut spending. This week it announced price increases for medicines and said it had sacked hundreds of workers, claiming the firings were part of an anti-corruption drive. It has also lifted a ban on the U.N. World Food Program bringing in medicines, according to senior U.N. officials.
     
    Kadri Jamil, Syria’s deputy prime minister for economic affairs, claims the U.S. and Britain have fomented his country’s economic woes through international economic sanctions. Those sanctions aside, the civil war’s effects inside the country have been devastating: towns and cities have been pummeled into ruins, industrial infrastructure destroyed and thousands of factories abandoned.
     
    Oil production, one of Syria’s biggest foreign currency earners, has dropped by 95 percent. Tourism -- another foreign currency mainstay --  has ground to a total halt. The World Bank says Syria’s GDP dropped almost by a third in 2012.

    You May Like

    Turkey, US Splits Deepen Over Support for Kurdish Militants

    Ankara summons American ambassador to protest remarks by State Department spokesman who said Washington does not consider Syria's Kurdish Democracy Union Party (PYD) a terrorist organization

    Obama Seeking $19 Billion for National Cybersecurity

    Move, touted as attempt to build broad, cohesive federal response to cyberthreats, calls for increase in cybersecurity spending across all government agencies

    Video Foreign Policy Weighs Heavy for Some US Voters

    VOA talks to protesters in Manchester, New Hampshire, who sound off on foreign policy issues such as the Guantanamo Bay prison, the Israeli-Palestinian conflict and the wars in Iraq, Syria and Yemen

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: Anonymous
    July 13, 2013 1:17 AM
    They should arrest assad for his crimes first for murdering tens of thousands of civilians, then the new government decides the fate of those that deal in foreign currencies. I don't think the so called Syrian government should be working on anything else but packing their bags.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Valentine's Day Stinks for Lebanese Clownsi
    X
    February 09, 2016 8:04 PM
    This weekend, on Valentine's Day in Lebanon, love is not the only thing in the air. More than half a year after the country's trash crisis began, the stink of uncollected garbage remains on the streets. Step forward "Clown Me In," a group of clowns who use their skills for activism. Before the most romantic day of the year the clowns have released their unusual take on love in Lebanon -- in a bid to keep the pressure up and get the trash off the streets. John Owens reports from Beirut.
    Video

    Video Valentine's Day Stinks for Lebanese Clowns

    This weekend, on Valentine's Day in Lebanon, love is not the only thing in the air. More than half a year after the country's trash crisis began, the stink of uncollected garbage remains on the streets. Step forward "Clown Me In," a group of clowns who use their skills for activism. Before the most romantic day of the year the clowns have released their unusual take on love in Lebanon -- in a bid to keep the pressure up and get the trash off the streets. John Owens reports from Beirut.
    Video

    Video Rocky Year Ahead for Nigeria Amid Oil Price Crash

    The global fall in the price of oil has rattled the economies of many petroleum exporters, and Africa’s oil king Nigeria is no exception. As Chris Stein reports from Lagos, analysts are predicting a rough year ahead for the continent’s top producer of crude.
    Video

    Video Foreign Policy Weighs Heavy for Some US Voters

    VOA talks to protesters in Manchester, New Hampshire who sound off on foreign policy issues such as the Guantanamo Bay Prison, the Israeli-Palestinian conflict, Middle East Affairs and national security.
    Video

    Video 'No Means No' Program Targets Sexual Violence in Kenya

    The organizers of an initiative to reduce and stop rape in the informal settlements around Kenya's capital say their program is having marked success. Girls are taking self-defense classes while the boys are learning how to protect the girls and respect them. Lenny Ruvaga reports from Nairobi.
    Video

    Video New Hampshire Voters Are Independent, Mindful of History

    Once every four years, the northeastern state of New Hampshire becomes the center of the U.S. political universe with its first-in-the-nation presidential primary. What's unusual about New Hampshire is how seriously the voters take their role and the responsibility of being among the first to weigh in on the candidates.
    Video

    Video Chocolate Lovers Get a Sweet History Lesson

    Observed in many countries around the world, Valentine’s Day is sometimes celebrated with chocolate festivals. But at a festival near Washington, the visitors experience a bit more than a sugar rush. They go on a sweet journey through history. VOA’s June Soh takes us to the festival.
    Video

    Video 'Smart' Bandages Could Heal Wounds More Quickly

    Simple bandages are usually seen as the first line of attack in healing small to moderate wounds and burns. But scientists say new synthetic materials with embedded microsensors could turn bandages into a much more valuable tool for emergency physicians. VOA’s George Putic reports.
    Video

    Video Bhutanese Refugees in New Hampshire Closely Watching Primary Election

    They fled their country and lived in refugee camps in neighboring Nepal for decades before being resettled in the northeastern U.S. state of New Hampshire -- now the focus of the U.S. presidential contest. VOA correspondent Aru Pande spoke with members of the Bhutanese community, including new American citizens, about the campaign and the strong anti-immigrant rhetoric of some of the candidates.
    Video

    Video Researchers Use 3-D Printer to Produce Transplantable Body Parts

    Human organ transplants have become fairly common around the world in the past few decades. Researchers at various universities are coordinating their efforts to find solutions -- including teams at the University of Pennsylvania and Rice University in Houston that are experimenting with a 3-D printer -- to make blood vessels and other structures for implant. As VOA’s Greg Flakus reports from Houston, they are also using these artificial body parts to seek ways of defeating cancerous tumors.
    Video

    Video Helping the Blind 'See' Great Art

    There are 285 million blind and visually impaired people in the world who are unable to enjoy visual art at a museum. One New York photographer is trying to fix this situation by making tangible copies of the world’s masterpieces. VOA correspondent Victoria Kupchinetsky was there as visually impaired people got a feel for great art. Joy Wagner narrates her report.
    Video

    Video German Artists to Memorialize Refugees With Life Jacket Exhibit

    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video E-readers Help Ease Africa's Book Shortage

    Millions of people in Africa can't read, and there's a chronic shortage of books. A non-profit organization called Worldreader is trying to help change all that one e-reader at a time. VOA’s Deborah Block tells us about a girls' school in Nairobi, Kenya where Worldreader is making a difference.
    Video

    Video Genius Lets World Share Its Knowledge

    Inspired by crowdsourcing companies like Wikipedia, Genius allows anyone to edit anything on the web, using its web annotation tool
    Video

    Video In Philippines, Mixed Feelings About Greater US Military Presence

    In the Philippines, some who will be directly affected by a recent Supreme Court decision clearing the way for more United States troop visits are having mixed reactions.  The increased rotations come at a time when the Philippines is trying to build up its military in the face of growing maritime assertiveness from China.  From Bahile, Palawan on the coast of the South China Sea, Simone Orendain has this story.

    World Currencies

    EUR
    USD
    0.8899
    JPY
    USD
    114.87
    GBP
    USD
    0.6937
    CAD
    USD
    1.3904
    INR
    USD
    68.044

    Rates may not be current.