Challenges of a collapsed lira, accompanied by food security

 Syria's pound -lira- has continued to slide down against the dollar after few 225% of its value in the black market since the outbreak of Syrian revolution against the Assad regime March 2011.

The hysteric increase relied on many reason, the newest one is lack of Dollar in the black market beside the Government rumors of dragging the Dollar dealers   to trial. The pound is trading at a rate of about 115 to the US dollar according to central bank data, while in the black market the rate has reached as high as 275 in Damascus and 300 in Aleppo. The pound used to trade at about 47 to the dollar before the uprising in 2011.

Syrian exchange markets witnessed today a hysteric movement of cash withdrawals of Syrian pounds by the clients according to the collapsed Syrian pound in front of Dollar, what makes dollar exceeded 275 SP that portends a wave of sharp rises in prices relating to the upcoming Ramadan, especially with the continuation of the unfixed prices of the Syrian goods, in light of the stability of the income of the citizen "15 thousand Syrian pounds per month, only about $ 55," according to Eqtsad (Business website affiliated with Zaman Alwasl).

 Months ago, Russia and China have helped support the Syrian economy and a $1bn credit line from Iran has helped back the exchange rate regime of the pound as the two-year rebellion against the Assad takes its toll on the country's industries and investment falls, while sanctions limit export capacity, according to the Arabian Business Magazine.

In the same context, In an attempt to beat Western sanctions and halt the fall in the Syrian pound, the Assad regime – with the help of Iran, Russia, and China – has begun conducting all of its business in rials, roubles, and renminbi. This decision supplements other existing arrangements between Syria and its allies that are keeping the Syrian economy on life-support. These include transfers of $500 million per month in oil and an unlimited credit line with Tehran for food and oil-product imports. Cato, the America institute for Economic studies, reported.

According to Kadri Jamil, Syria’s prime minister for the economy, this life support is necessary because Syria’s devastated economy is the target of an elaborate plot, hatched by the U.S. and Britain, to “sink the Syrian pound.”

So, what about the sinking pound? As the accompanying chart shows, the Syrian pound has lost 66.2% of its value in the last twelve months.

The rout of the Syrian pound has been widely reported in the press.  But, Syria’s inflation problems that have accompanied the collapse of the pound have gone largely unreported.  That’s because, beyond the occasional bits of anecdotal evidence, there has been nothing to report by way of reliable economic data.

To fill that void, I employ standard techniques to estimate Syrian’s current inflation. Currently, Syria is experiencing an annual inflation rate of 200% (see the accompanying chart.

Indeed, Syria is experiencing a monthly inflation rate of 34%. To facilitate the monitoring of the quickly deteriorating situation in Syria, I am creating a resource which will allow readers to view up-to-date data on the Syrian pound and the country’s inflation problems. Soon, black-market exchange-rate data and ¬inflation estimates for countries with troubled currencies like Syria will be made available via the “Troubled Currencies Project” – a joint Cato Institute-Johns Hopkins collaboration under my direction. In consequence, the days of Syria’s plunging pound and raging inflation being covered in a shroud of secrecy are soon coming to an end.

In relevant development, Four million Syrians, or a fifth of the population, are unable to produce or buy enough food for their needs and the situation could deteriorate further next year if the two-year old conflict continues, the United Nations said according to Reuters.

Following a visit to Syria between May and June, the U.N. Food and Agriculture Organization (FAO) and the World Food Programme (WFP) said in a report that domestic production over the next twelve months is likely to be severely compromised.

The agencies estimated Syria would need to import 1.5 million metric tons (1 metric ton = 1.1023 tons) of wheat for the 2013/14 season. Wheat production has fallen to 2.4 million metric tons, some 40 percent less than the annual average harvest before the conflict of more than 4 million metric tons, they said according to Reuters.

Editing by Mohamed Hamdan