Doubts arise over sustainability of Syrian central bank's intervention in exchange market

Source:Xinhua Published: 2013-7-24 9:06:02

Contrary to many's expectation, the latest intervention by the Central Bank of Syria (CBS) has succeeded in scaling down the exchange rate of the US dollar against the Syrian pound by nearly 50 percent within a very short period of time. Yet, experts think that the measure is only temporary and the Syrian pound may soon depreciate again.

A week ago, the local currency declined to its lowest value ever when a dollar was traded for 325 Syrian pounds in the black market. The drop led to a popular outcry and appeals for the government to intervene as prices of all commodities had kept pace with the rising dollar and ratcheted up by nearly five folds.

The CBS held five consecutive sessions with exchange companies to sell dollars at prices lower than those in the black market. On Monday, the bank, in its fifth session, sold to exchange companies no less than 50,000 dollars at 176.20 Syrian pounds per dollar, and the companies then sold them to people at 178. At the same time, the price of a dollar was 180 Syrian pounds in the black market.

Observers said the measure ushered in the start of the stabilization of the exchange rate at a level that could last, at least, to after the holy month of Ramadan, which ends before mid- August.

Yet, doubts exist. Monetary expert Abed Fadhliya told local media that it is possible for the government to bring back the exchange rate to any level it wants if it pumps sufficient amount of hard currency in the market. But he questioned the significance of the current depreciation of the dollar in the black market as well as the rationality of the move of "pumping huge quantities of hard currency."

"What is the importance of this measure if it's temporary or if it's for specific hours or even days?"

He said that such a temporary, procedural monetary method will not improve the national economy and will stop to exist as soon as the intervention halts.

He warned that if the bank stops its intervention for a week, the price of the dollar could rise again because of the manipulators in the black market.

Describing the current method as unsustainable, Fadhliya underscored the necessity of intervention through other economic mechanisms that can ensure continuity. He also noted that the radical decrease of the dollar against the Syrian pound within a short time is "abnormal."

Deputy Prime Minister for Economic Affairs, Qadri Jamil, said recently that the government's goal was to reach the level of 100 Syrian pounds per dollar.

Anyway, speculations are high among Syrians on whether the bank will be able to go on with the policy of intervention owing to the deteriorating economic conditions in this war-torn country and the persistent US and European sanctions that have drained up most of the country's resources.

On Monday, after meeting with Russian Foreign Minister Sergei Lavrov in Moscow, Jamil said he was "hopeful" of reaching an agreement before the end of the year on a Russian loan to Syria.

Posted in: Economy

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