The Syrian government surrenders to the issue of weak financial reserves – Economist

The Syrian government surrenders to the issue of weak financial reserves – Economist

Amude – North-Press Agency
Avin Sheikhmous

 

A professor of economics confirmed to North-Press that the dollar is left freely and that the Syrian government surrenders to the issue of the weak financial reserves, and that the situation of the Syrian pound (Lira) is like the Iraqi dinar, and may turn into a situation similar to Venezuela.

Dr. Muslim Abd Talas pointed out that the value of the currency is dependent on two basic things: the size of Gross Domestic Product GDP (national income) and the money supply. He stressed  that whenever the size of GDP declines and the currency's value reduces, while when the money supply increases, the value of the Syrian pound decreases simultaneously.

 

Dr. Talas described the Syrian economy as being in a "state of great weakness", adding that "the money supply is growing very quickly, as every year we have a large deficit in the state's general budget, by printing new currencies and pumping them into the markets," he said. "The deficit in the state's general budget in the upcoming year is 1,4 trillion Syrian pounds, as a large percentage of it will be dedicated for printing a new currency, which means the currency will drop naturally," according to what the academic researcher confirmed.

 

Moreover, he added that in the general direction of the decline of the Syrian currency to about 1,200 pounds, as in the case of the Iraqi dinar, "it is very possible and simple for the currency to reach this number." As for the question of Caesar's Law sanctions, "it may turn the central bank into an institution accused of money laundering, and whoever deals with could be accused. Thus, Syria would be isolated, which in turn may lead to something similar to Venezuela, in terms of dropping to the level of 1,200 Syrian pound or other." This is related – according to Dr. Talas' view – to the application of sanctions or political developments, which is another matter.

He continued saying: "If you want to fix a certain currency at a certain rate, you must have a reserve of funds, and a strong economy, capable of stabilizing, while our economy is weak, and the problems are pushing us towards a decline and in this case you must have huge reserves in the central bank, through which it enables creating an artificial demand for the Syrian pound, and thus maintaining a certain level, however, you need massive foreign currency reserves for which the Syrian currency is purchased."

According to the technical perspective or ability, Syria does not have these reserves, and according to the estimates, "The Syrian currency reserves range between 250 to 750 million dollars, which is too little to stabilize the level of foreign currency, and this solution is not feasible therefore. The Syrian state surrenders to this issue, and the dollar is left freely.”