Syria says will support currency after plunge in value

Reuters News
Posted: Apr 04, 2013 4:30 AM
Syria says will support currency after plunge in value

BEIRUT (Reuters) - Syria announced on Thursday that it will take steps next week to support its currency after the pound plunged by nearly a quarter last month against the dollar, part of a two-year slide caused by a revolt and ensuing civil war.

The announcement on state media by Central Bank Governor Adeeb Mayaleh comes after a vague pledge of support last month which was followed by days of inaction, leading to fears that authorities were no longer willing to burn up reserves to defend the currency.

Mayaleh said the central bank will "sell foreign currency to banks and exchange institutions ... in a way to guarantee a stable Syrian pound," starting at the beginning of next week.

Civil war now rages in most of Syria's provinces and the United Nations says 70,000 people have been killed. Bankers and dealers said the pound has lost more than half of its value since the uprising began in 2011, when the currency stood at 47 pounds to the dollar.

The government has stepped in several times to prop up the pound, which has dropped as confidence in the currency plunged and Syrians have hoarded dollars.

But Syrian's foreign reserves - already hit by a slump in tourism and oil revenues and by previous efforts to prop up the currency - are estimated by some bankers to be as low as $4 billion, which would mean the central bank cannot continue to support the pound indefinitely.

Syria's foreign reserves were estimated by officials and independent economists at $17 billion before the uprising. If the pound is allowed to fall, it would further drive up inflation in a country where food and fuel prices have already skyrocketed. Economists say inflation could be running at around 40 percent.

(Reporting by Oliver Holmes; Editing by Susan Fenton)