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

    Multimedia US Observes Memorial Day With Wreath-laying, National Concert

    Obama lays a wreath at the Tomb of the Unknown Soldier in Arlington Cemetery

    The Strife of the Party: Will Trump Permanently Alter Republicans?

    While billionaire mogul's no-holds-barred style, high-energy delivery are what rocketed him to nomination, they also have created rift between party elites and his supporters

    China's Education Reforms Spark Protest

    Beijing is putting a quota system in place to increase the number of students from poor regions attending universities

    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.
    Chinese-Americans Heart Trump, Bucking National Trendi
    X
    May 27, 2016 5:57 AM
    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Chinese-Americans Heart Trump, Bucking National Trend

    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Reactions to Trump's Success Polarized Abroad

    What seemed impossible less than a year ago is now almost a certainty. New York real estate mogul Donald Trump has won the number of delegates needed to secure the Republican presidential nomination. The prospect has sparked as much controversy abroad as it has in the United States. Zlatica Hoke has more.
    Video

    Video Drawings by Children in Hiroshima Show Hope and Peace

    On Friday, President Barack Obama will visit Hiroshima, Japan, the first American president to do so while in office. In August 1945, the United States dropped an atomic bomb on the city to force Japan's surrender in World War II. Although their city lay in ruins, some Hiroshima schoolchildren drew pictures of hope and peace. The former students and their drawings are now part of a documentary called “Pictures from a Hiroshima Schoolyard.” VOA's Deborah Block has the story.
    Video

    Video Vietnamese Rapper Performs for Obama

    A prominent young Vietnamese artist told President Obama said she faced roadblocks as a woman rapper, and asked the president about government support for the arts. He asked her to rap, and he even offered to provide a base beat for her. Watch what happened.
    Video

    Video Roots Run Deep for Tunisia's Dwindling Jewish Community

    This week, hundreds of Jewish pilgrims are defying terrorist threats to celebrate an ancient religious festival on the Tunisian island of Djerba. The festivities cast a spotlight on North Africa's once-vibrant Jewish population that has all but died out in recent decades. Despite rising threats of militant Islam and the country's battered economy, one of the Arab world's last Jewish communities is staying put and nurturing a new generation. VOA’s Lisa Bryant reports.
    Video

    Video Meet Your New Co-Worker: The Robot

    Increasing numbers of robots are joining the workforce, as companies scale back and more processes become automated. The latest robots are flexible and collaborative, built to work alongside humans as opposed to replacing them. VOA’s Tina Trinh looks at the next generation of automated employees helping out their human colleagues.
    Video

    Video Wheelchair Technology in Tune With Times

    Technologies for the disabled, including wheelchair technology, are advancing just as quickly as everything else in the digital age. Two new advances in wheelchairs offer improved control and a more comfortable fit. VOA's George Putic reports.
    Video

    Video Baby Boxes Offer Safe Haven for Unwanted Children

    No one knows exactly how many babies are abandoned worldwide each year. The statistic is a difficult one to determine because it is illegal in most places. Therefore unwanted babies are often hidden and left to die. But as Erika Celeste reports from Woodburn, Indiana, a new program hopes to make surrendering infants safer for everyone.
    Video

    Video California Celebration Showcases Local Wines, Balloons

    Communities in the U.S. often hold festivals to show what makes them special. In California, for example, farmers near Fresno celebrate their figs and those around Gilmore showcase their garlic. Mike O'Sullivan reports that the wine-producing region of Temecula offers local vintages in an annual festival where rides on hot-air balloons add to the excitement.
    Video

    Video US Elementary School Offers Living Science Lessons

    Zero is not a good score on a test at school. But Discovery Elementary is proud of its “net zero” rating. Net zero describes a building in which the amount of energy provided by on-site renewable sources equals the amount of energy the building uses. As Faiza Elmasry tells us, the innovative features in the building turn the school into a teaching tool, where kids can't help but learn about science and sustainability. Faith Lapidus narrates.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8954
    JPY
    USD
    109.65
    GBP
    USD
    0.6827
    CAD
    USD
    1.3037
    INR
    USD
    67.037

    Rates may not be current.