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18/06/2013 Share/Save/Bookmark
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SYP vs U.S. Dollar
SYP vs U.S. Dollar

Syrian Pound Tumbles to Record Low

(DP-News - agencies)

Syria- A dramatic devaluation of the Syrian pound declined by roughly 40 Pounds against the U.S. dollar in a single day in the black market on Monday, while as top Syrian officials are still determined that Syria`s economy is stable and capable of facing all challenges and difficulties.

Reports said that traders across Syria reported widely fluctuating rates and two currency dealers in Damascus, where the pound appeared to be hit hardest, said it fell below 200 to the dollar for the first time in what one described as panic buying of the U.S. currency.

Over the past 24 hours; a sharp depreciation of the pound as U.S. dollar soared from 170 pounds to around 210 pounds.

Media reports said that there is currently a meeting combining top Syrian officials and economists, including the governor of the Central Bank of Syria and exchange dealers, to discuss the issue of the striking rise in the exchange rate of the dollar against the pound, and to find an appropriate way of intervening to rein in the upward climb of the dollar price.

On Monday evening the pound traded at 205 to the dollar, down 20 percent in four days and 77 percent down since the start of the anti-Assad uprising in March 2011 when it was at 47, reports said.

The fall in the pound's purchasing power has also ramped up the prices of most commodities across Syria, bankers and economists say.

Dealers told Reuters that the turmoil was fuelled by White House comments that Washington will step up military aid for Syrian rebels, hardening stances by the Arab world's heavyweights Saudi Arabia and Egypt, and calls by Sunni Muslim clerics for holy war.

Dealers also blame the progressive fall in the pound since March on the failure of Central Bank Governor Adeeb Mayaleh to back up his promises to support the pound, which stood at around 100 to the dollar at the end of last year.

The sharp fall since then, after nearly two years of more managed decline, came despite Mayaleh's comments that Syria was getting financial aid from its allies Russia and Iran and market talk Tehran had deposited at least $2 billion in the central bank, according to some dealers.

Mayaleh's injection of 100 million euros also failed to stem the fall, with some dealers saying the requirements for taking up the money were so burdensome that only 5 million euros reached the market.

Later on Monday, Governor of Central Bank of Syria (CBS) Adeb Mayaleh said that as of Tuesday, the bank will respond to the banks' demands for buying the foreign currency from CBS to finance imports according to the market needs.

"CBS will provide the exchanging institutions and the Commercial Bank of Syria with the foreign currency by acceptable prices in order to meet the citizens' requests to buy the foreign currencies according to regulations which sell each citizen an amount of 1000 Euro per month," Mayaleh said in a statement.

Mayaleh also affirmed Monday that the government put the needed mechanisms to activate the credit facilitation line granted by Iran with 1 billion USD to fund a big part of the market needs.

Mayaleh stressed that the current price of the dollar in the black market was "false and illogical" and urged the Syrians not to be believe allegations.

For his part, the Syrian Prime Minister Wael al-Halqi said Monday during the meeting of the economic commission entrusted with following up the pound exchange rate that the government has large reserves of foreign exchange to provide all the needs of the Syrian market of imported goods and production inputs.

Wael al-Halqi stressed that the government was working around the clock to follow up the exchange rate and take package of economic measures to enhance the national economy.

The premier referred to the support of what he called the friendly countries of the Syrian people economically, especially Iran through its willingness to finance all Syrian imports and the requirement of industrial and agricultural production.

In the last two months the central bank had even stopped selling the two to three million dollars it had been offering to leading exchange firms and which was credited with reducing rate fluctuations and holding back the pound from further slides.

One banker said this was a sign the authorities may no longer have sufficient foreign reserves, which bankers say have fallen substantially from a record $18 billion before the crisis, to bolster the pound.

Others said it appeared the priority of defending the local currency was now overtaken by the pressing need to finance crucial imports of subsidized foodstuffs to strengthen loyalty in state-controlled areas.

Bankers and currency traders contacted in Damascus said the central bank was now turning a blind eye to official exchange dealers selling at market prices that were at least 10 percent higher than a daily benchmark the central bank sets after averaging dealer quotes.

Such a move would have risked tough retaliation by Mayaleh against currency traders, several of whom have had their licenses revoked and were heavily fined last year.

Bankers say the pound's plunge exposed the vulnerability of a risky policy of non-intervention based on the assumption that pressures on the pound remained manageable in the short term.

It also reflected heightened demand by panicky Syrians now hoarding the dollar as a hedge in a battered economy that was increasingly dollarized.

Suleiman Suleiman, an economist, blamed the high decrease in the pound's value on the suffocating economic siege and the failure of the Syrian economic team to offer effective solutions to control the exchange rate's prices.

He told Xinhua that the economic sanctions on Syria had also created a security crisis,noting that most of the commodities couldn't arrive in the country and stir up inflation, which is in its turn, has been reflected on the pound and its purchasing power.
"All solutions generated by the economic kitchen, including the monetary fund and the governor of the central bank, have been of no avail," he said.

He said that for the government to keep a tight rein on the markets there should be a real control on the exchange rate, on the exchange dealers and the black markets, and to lure dollars back to banks via offering a certain interest.
Yet, he added, "If the central bank's governor insists to go on with the same economic policies, there would be more rise in the prices on the market because the crisis and the economic siege are still there."

Suleiman ruled out the possibility of dollarization in the market, saying "around 80 percent of the Syrian people are from the middle and lower classes that depend mostly on the Syrian pound and not the dollar."

The Syrian Central Bank has not released foreign currency reserves for the past year or so, but experts say there is a strong reason to believe that Iran and Iraq may be pumping billions of U.S. dollars to help President Bashar Assad’s regime withstand mounting economic and financial pressures.

It is also not clear how many dollars the Central Bank pumps into the market every day.

Some analysts argue that once there is a genuine political settlement or if the opposition manages to topple Assad, the international community may be willing to shore up the economy and inject badly needed cash to beef up the local currency.

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