Sunday, May 15, 2016

Indication of economic culmination in Syria

The currency is in freefall.

“The Central Bank always announces that it will pump tens of millions of dollars into the economy, and then they pump a few million and stop,” Ayad a-Jafari, editor of the online economic journal Iqtisadi, tells Syria Direct.
Since Tuesday, the black market exchange rate in Damascus has hovered between SP625:$1 and SP630:$1, according to Syria-Stocks, although some currency exchanges in regime-controlled Damascus and Aleppo have reported further increases.
“Even if the Central Bank can reign in the crisis temporarily, the situation will quickly slip out of its hands again,” says a-Jafari.
According to a-Jafari, the pound will continue to lose value “as long as the underlying causes of the deterioration persist.”
“The country’s manufacturing capacity is in its worst state in years,” he explains, “which means that the country relies primarily on importing, which in turn requires dollars and therefore increases the demand for foreign currency and exacerbates the deterioration of the pound.”
In other words, the Syrian government must counteract the large volume of Syrian pounds traded for dollars by trading its own foreign currency reserves for pounds, albeit at continuously higher prices...."

The tax base is in gone.

Government payrolls are a fraction of living expenses ($30 per month against what we think are about $150/month/capita in Syria.

"...The Syrian economy has been in free fall since 2012 and tax revenues have virtually collapsed, according to the World Bank. The government’s territorial losses in oil-rich areas have added to its woes.... “They used to export a lot of oil, but Daesh has being doing it on their behalf,” said Neaime, referring to the militant Islamic State group by its Arabic acronym.
The currency’s value has eroded since Russia announced it was scaling back its involvement in the war on the side of the government, in March, when it traded on the black market at roughly 440 pounds to the dollar...."

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Taxation has dropped to 10 per cent of what it was in 2011 and in any case there is little to take from citizens impoverished by years of war.
Adib Mayaleh, Syria’s central bank governor, has announced a daily review of the currency rate, which some economists view as a small step towards a floating exchange rate. But some Syrians complain that the move will only encourage speculation.
In Facebook groups where Syrians discuss the economy, many are sharing their fears that the currency could reach S£1,000 to the dollar, which would spell disaster for the 2.7m citizens on the state payroll who would see their monthly salaries drop to $20-$30. More than 80 per cent of Syrians already live under the poverty line...."