Civil War, Sanctions and a Falling Currency Produce Soaring Prices as People Shop for Ramadan
By SAM DAGHER
DAMASCUS, Syria—On a recent morning, a woman stood in front of a stall lining Bab Serijeh, the capital’s biggest and most raucous food market, and expressed amazement at how prices of local tomato paste and olive oil have quadrupled and quintupled, respectively, over the past year.
In another part of the capital, Amal Zuhairi, a 44-year-old civil servant, came out empty-handed from the Oumawyeen state cooperative. A few weeks ago, she had bought corn oil there for 325 Syrian pounds ($1.63) per liter. Now, the cooperative has run out of oil and it is selling for 490 pounds a liter in Bab Serijeh.
Ramadan and the Eid al-Fitr holiday that follows—it starts Thursday—are usually the busiest shopping season here. But for many Syrians, this is one of the worst Ramadan periods in recent history as hyperinflation has devalued the Syrian currency and eroded consumers’ purchasing power. The situation is even worse for those in rebel-controlled areas where military operations have restricted access to many essentials.
The Syrian pound has lost almost 70% of its value over the past 12 months. There are no official up-to-date inflation figures but in an interview Syria’s Deputy Prime Minister for Economic Affairs Kadri Jamil estimated that inflation reached about 120% at the end of 2012.
“We have not counted 2013 yet and it’s more dismal in my opinion,” he said.
Steve H. Hanke, a professor of applied economics at Johns Hopkins University, estimates that inflation is running at 213% so far this year.
Mr. Jamil said the hyperinflation was a result of declining production because of the war and a sharp increase in money supply. He expressed confidence in the government’s ability to tame inflation, using loans from foreign allies and bolstering its foreign-currency reserves to defend the Syrian pound.
Syria’s economy is a command-based socialist one with the state being the largest employer. Liberalization and privatization started shortly after President Bashar al-Assad assumed power in 2000. The economy became among the most promising in the Arab world, even though many economists inside and outside the country say the process has been mired by corruption and sweetheart deals to relatives and businessmen close to the regime.
After the start of the uprising against Mr. Assad in March 2011, many of these businessmen fled Syria and moved their capital overseas. War and international sanctions have slashed gross domestic product by more than half, according to economists and officials.
Now, the Syrian regime is turning to allies Iran and Russia for more credit lines and loans. Mr. Jamil said Iran, Russia and other “friends” will be rewarded for their loyalty in the future with concessions for the extraction of natural gas off the country’s west coast.
Last week, Tehran completed a $3.6 billion credit line to the Syrian regime for the supply of oil and gas products in exchange for unspecified future investments. Syria’s own oil and gas production has come to a near halt because of the war, and the regime has been importing most of its petroleum from Iran and Iraq.
The Syrian regime can’t afford to have support erode because of hyperinflation. On Sunday, President Assad issued a decree aimed at combating what the government described as the “dollarization” of the economy. The decree imposes heavy fines and prison terms of as long as 10 years for anyone conducting commercial transactions in a currency other than the Syrian pound.
For now, Syrians struggle to get by.
Ahmed Awad, 38 years old, left his home in the Damascus suburbs five months ago for fear of being targeted by rebels because he works as a courier for the national power company. He now lives in a safer suburb with his wife and four children in a rent-free room provided by a mosque. He said he takes home only 15,000 Syrian pounds a month. “Everything I earn is gone at the start of the month,” Mr. Awad said.
Rawan al-Hakim, a 27-year-old marketing director at a privately held cement company, said her monthly salary is 55,000 Syrian pounds. Before the war this was equivalent to almost $1,200, a hefty sum by Syrian standards.
Now it is worth about $275. She said her company hasn’t raised salaries and may shut down soon because of plummeting sales. “All said, I am living like a queen compared to others,” she said.
Write to Sam Dagher at firstname.lastname@example.org
A version of this article appeared August 8, 2013, on page A8 in the U.S. edition of The Wall Street Journal, with the headline: Inflation Ravages Syrian Consumers.