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

China May Be Biggest Winner From Ukraine Crisis

Missile sales, oil and gas shipments are among many areas that may drive Beijing and Moscow closer together in coming years More

Obama Faces Chaotic World, Limits of Power

Current foreign policy issues bring into focus challenges for US policymakers who are mindful of Americans' waning appetite for overseas military engagements More

SADC Meeting Lesotho Officials to Resolve Stalemate

Official says regional bloc has been engaged with leaders in Lesotho to resolve political disagreement that led to coup attempt More

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.
Ukraine Schools Resume Classes, Donate to Government Forcesi
X
September 02, 2014 12:58 PM
A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video Ukraine Schools Resume Classes, Donate to Government Forces

A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video US Detainees Want Negotiators for Freedom in North Korea

The three U.S. detainees held in North Korea were permitted to speak with foreign media Monday. The government of Kim Jong Un restricted the topics of the questions, and the interviews in Pyongyang were limited to five minutes. Each of the men asked Washington to send a representative to Pyongyang to secure his release. VOA’s Carolyn Presutti has our story.
Video

Video Internet, Technology Offer New Tools for Journalists

The Internet and rapidly evolving technology is quickly changing how people receive news and how journalists deliver it. There are now more ways to tell a story than ever before. One school in Los Angeles is teaching the next generation of journalists with the help of a state-of-the-art newsroom. Elizabeth Lee has this report.
Video

Video Turkmen From Amerli Describe Survival of IS Siege

Over the past few weeks, hundreds of Shi'ite Turkmen have fled the town of Amerli seeking refuge in the northern city of Kirkuk. Despite recent military gains after U.S. airstrikes that were coordinated with Iraqi and Kurdish forces, the situation remains dire for Amerli’s residents. Sebastian Meyer went to Kirkuk for VOA to speak to those who managed to escape.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.