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

Video Indiana Controversy Points to Divergent Notions of Religious Freedom

Gay-marriage opponents are looking for ways to maintain their beliefs in face of changing culture, one writer says More

UNICEF Denies North Korean Measles Outbreak

Agency dismisses Russian media report after government, WHO assurances More

Turkey Seen Taking Harder Stance Against Militant Kurds

Stance comes as President Recep Tayyip Erdogan is being seen as moving closer to generals 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.
Indiana Controversy Highlights Divergent Meanings of Religious Freedomi
X
Jerome Socolovsky
April 01, 2015 1:41 AM
Indiana’s state government has triggered a nationwide controversy by approving a law that critics say is aimed at allowing discrimination against gays and lesbians. The controversy stems from divergent notions of religious freedom in America. VOA's Jerome Socolovsky reports.
Video

Video Indiana Controversy Highlights Divergent Meanings of Religious Freedom

Indiana’s state government has triggered a nationwide controversy by approving a law that critics say is aimed at allowing discrimination against gays and lesbians. The controversy stems from divergent notions of religious freedom in America. VOA's Jerome Socolovsky reports.
Video

Video Nigerians Welcome Buhari's Return to Power

Crowds of jubilant Nigerians nationwide have celebrated the return to power of former military ruler Muhammadu Buhari. The retired army general won this year's presidential election with more than 2 million votes more than incumbent President Goodluck Jonathan. Buhari's supporters hope he can strengthen the country's economy and security once he takes office in late May. Zlatica Hoke has this story.
Video

Video Report: State of Black America a 'Tale of Two Nations'

The National Urban League has described this year's "State of Black America" report as a "tale of two nations." The group's annual report, released earlier this month (March), found that under an equality index African Americans had only 72% parity compared to whites in areas such as education, economics, health, social justice and civic engagement. It’s a gap that educators and students at Brooklyn’s Medgar Evers College are looking to close. VOA's Daniela Schrier reports from the school.
Video

Video Film Tells Story of Musicians in Mali Threatened by Jihadists

At this year's annual South by Southwest film and music festival in Austin, Texas, some musicians from Mali were on hand to promote a film about how their lives were upturned by jihadists who destroyed ancient treasures in the city of Timbuktu and prohibited anyone from playing music under threat of death. As VOA’s Greg Flakus reports from Austin, some are afraid to return to their hometowns even though the jihadists are no longer in control there.
Video

Video Gamma Ray Observatory to Open Soon in Mexico

American and Mexican scientists have completed construction of the world's largest gamma ray observatory, situated high in central Mexico’s Sierra Negra Mountain. The observatory's huge array of water-based detectors will soon start discovering secrets about black holes and supernovas. VOA’s George Putic reports.
Video

Video Ebola Vaccine Trials Underway in West Africa

Ebola has claimed the lives of more than 10,000 people in West Africa. Since last summer, researchers have rushed to get anti-Ebola vaccines into clinical trials. While it's too early to say that any of the potential vaccines work, some scientists say they are seeing strong results from some of the studies. VOA's Carol Pearson reports.
Video

Video Philippines Wants Tourists Spending Money at New Casinos

Tourism is a multi-billion dollar industry in the Philippines. Close to five million foreign visitors traveled there last year, perhaps lured by the country’s tropical beaches. But Jason Strother reports from Manila that the country hopes to entice more travelers to stay indoors and spend money inside new casinos.
Video

Video Civilian Casualties Push Men to Join Rebels in Ukraine

The continued fighting in eastern Ukraine and the shelling of civilian neighborhoods seem to be pushing more men to join the separatist fighters. Many of the new recruits are residents of Ukraine made bitter by new grievances, as well as old. VOA's Patrick Wells reports.
Video

Video Islamic State Prisoners Talk of Curiosity, God, Regret

Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Germanwings Findings Raise Issue of Psychological Testing for Pilots

More is being discovered about the co-pilot in the crash of Germanwings Flight 9525 in the French Alps. Investigators say he was hiding a medical condition, raising questions about the mental qualifications of pilots. VOA's Carolyn Presutti reports.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.

VOA Blogs

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.9220
JPY
USD
119.88
GBP
USD
0.6757
CAD
USD
1.2640
INR
USD
62.626

Rates may not be current.