Friday, January 20, 2012
Syria to Start Managed Float of Currency Next Week, Central Bank Head Says
Syria will introduce a managed float of its currency next week, central bank Governor Adib Mayaleh said. The move will allow the pound to devalue after demand for foreign currency drove a surge in black-market rates.
“We will have a partial managed float, allow the rate to be determined by the market and intervene when necessary,” Mayaleh said in a phone interview from Damascus today. “If we see a rate, like that of 70 pounds now, which I don’t like, then we will intervene, and next week there will be a positive intervention by the central bank with the injection of foreign currency into the market.”
The pound traded officially at about 47 to the dollar before the start of protests against President Bashar al-Assad in mid-March. As the uprising spread, the central bank raised the rate to about 54 pounds in December and 57 pounds early this month. The currency traded at as much as 70 pounds per dollar on Syria’s black market this week.
The money for the float will come from the bank’s funds, Mayaleh said. While he declined to specify the size of the bank’s foreign-currency reserves today, he told Bloomberg on Oct. 21 that the reserves were about $18 billion and that Syria had spent $3 billion from a separate fund defending its currency and financing trade since protests erupted.
Inflation - “This is a conscious decision by the regime and the bank to allow some kind of inflation,” said Chris Phillips, a lecturer in international relations specializing in the Middle East at Queen Mary College in London. “Clearly they want to use their reserves sparingly, and maintaining the low value that the Syrian pound has had for the last five to 10 years clearly is no longer a priority for them.”
The managed float “might be one way of saying they do need to get external funds from somewhere in order to keep the value down, which suggests their reserves are running low,” Phillips said. The move “also will offer them an opportunity in the future to blame someone other than themselves for what is inevitably is going to be a major devaluation in the currency.”
The pound has lost about 19 percent of its value against the dollar since the unrest began, according to data compiled by Bloomberg.
‘Imaginary’ Devaluation
read full report @ Link
