Syria Country Office

SYRIA COUNTRY OFFICE

MARKET PRICE WATCH BULLETIN January 2020 ISSUE 62

Picture @ WFP/Hussam Al Saleh

@ WFP/ Pakinam Moussa

Figure 1: Food basket cost and changes, SYP Highlights Standard Food Basket ○ The national average price of a stand- In January 2020, the national average price of a ard reference food basket increased by standard reference food basket1 increased by 13 13 percent in January 2020 m-o-m percent reaching SYP 37,556 compared to December reaching SYP 37,556 and by 60 percent 2019. The national average food basket price has compared to January 2019 (USD 86.5 at increased by 52 percent since July 2019 and by 60 the official exchange rate 434/$). percent since January 2019 (Figure 1). ○ The national average informal ex- Twelve governorates reported an increasing average reference food basket price in January 2020 with the change rate in January 2020 was SYP highest month-on-month (m-o-m) increase reported 1,028/USD (up 17 percent m-o-m) while in Idleb (up 27 percent) followed by Deir-ez-Zor (up the official exchange rate has remained 26 percent) and Damascus (up 22 percent). The in- unchanged at SYP 434/USD since late crease across all governorates is primarily driven by Chart 1: National min., max. and average food basket cost, SYP 2017. the depreciation of the Syrian Pound on the informal ○ In January 2020, the national average exchange market while for Idleb it is also related to retail prices of cereals increased m-o-m the continued intense fighting in the governorate as by eight percent for wheat flour to well as disrupted supply routes in north-west Ar- reach SYP 396/Kg; by 15 percent for Raqqa and East Aleppo. Tartous and Homs were the Egyptian white rice to reach SYP 693/Kg; only governorates that reported no change in the and by 13 percent for bulgur to reach reference food basket from last month. SYP 492/Kg. The highest average food basket price was reported at SYP 50,636 in Idleb followed by Al-Hasakeh at SYP ○ The national average ToT between 40,008 and Lattakia at SYP 39,875. On the other wheat flour and wage labour, a proxy hand, the lowest reported average food basket price indicator for purchasing power, de- in January was still reported in Homs at SYP 31,187 Map 1: Location of markets monitored by WFP creased by five percent m-o-m. High- followed by Aleppo at SYP 33,497. lighting a worsening purchasing power trend. Compared to last year, the price of the reference food basket increased significantly across all 14 gov- ○ Idleb continues to report one of the ernorates. The largest y-o-y increases were recorded highest m-o-m price increases for key in Idleb (up 120 percent) followed by Al-Hasakeh (up staple commodities. 84 percent).

For further information please contact: The gap between the highest and lowest recorded Jan Michiels at average food baskets is continues to widen. The gap [email protected] expanded by 68 percent from SYP 11,567 in Decem-

Pakinam Moussa at ber 2019 to SYP 19,449 in January 2020 (Chart 1). [email protected] Highlighting worsening trade relations across Syria.

1. The standard food basket is a group of essential food commodities. In Syria, the food basket is set at a group of dry goods providing 1,930 kcal a day for a family of five during a month. The 1 basket includes 28.46 kg bread, 19 kg rice, 19 kg lentils, 5 kg of sugar, and 7 litres of vegetable oil

Exchange rate Table 1: Informal market exchange rate, 1 USD to SYP January % change % change Overview Governorate 2020 (m-o-m) (y-o-y) While the Syrian Pound’s official exchange rate remains unchanged at SYP 434 per Aleppo USD, the currency continued its rapid depreciation on the informal market, depre- 951 11% 90% ciating a further 17 percent m-o-m. The Syrian Pound has now depreciated by 62 Al-Hasakeh 975 6% 95% percent since October 2019 and by 106 percent since January 2019. Ar-Raqqa 993 12% 99% The continuous depreciation of the Syrian Pound on the informal market is a re- As-Sweida 1,014 10% 104% sult of multiple events including: the Lebanese financial crises; Syrian Government Damascus 1,047 28% 109% introducing measures to stop traders smuggle goods and benefit from the depreciating currency; international sanctions on the Syrian economy; reduced foreign Dar'a 999 14% 104% direct investment into Syria and continued intense fighting in North West Syria Deir-ez-Zor 1,113 25% 123% among others. Hama 1,021 13% 100% The Lebanese financial crises stands out as a key reason for the recent deprecia- Homs 1,021 13% 100% tion of the Syrian Pound on informal markets. Many Syrians including traders and the general population have deposited their life’s savings in Lebanese bank ac- Idleb 1,008 22% 102% counts due to international sanctions on Syrian banks. It is believed that around Lattakia 1,090 22% 118% 20 percent of bank deposits in Lebanon belong to Syrian citizens, residents or non- Quneitra 1,025 19% 104% residents. The US Dollar liquidity crises in Lebanon and the resulting restrictive Rural Damascus 1,039 27% 108% measures put in place by Lebanese banks have therefore heavily reduced the amount of US Dollars accessible to Syrians. Even though difficult to fully quantify, Tartous 1,100 24% 120% some reports mention around US $30 billion are currently stored by Syrians in National average 1,028 17% 106% Lebanese banks. Official rate 434 0% 0% Government measures UN operational rate 700 0% 0% In an attempt to curtail the depreciating Syrian currency on the informal exchange Chart 2: Syria’s official and informal exchange rates to 1 USD during the crises market, The Syrian Government has closed all unofficial currency exchange shops. The Syrian Government has also increased prison sentences for informally dealing with any currency other than the Syrian Pound, from three to seven years in jail.

In an attempt to lower the informal exchange rate and to ensure greater government availability of USD, The Central Bank of Syria has allowed a ‘grace period’ for anyone wishing to exchange their USD into SYP at a preferential rate of SYP 700/ USD instead of the official rate of SYP 434/USD. The Syrian Government has also increased the United Nations (UN) operational currency exchange rate from SYP 434/USD to SYP 700/USD in December 2019, hereby facilitating UN humanitarian interventions in the country.

To try and address inflationary pressures The Syrian Government has increased the salary of government employees by SYP 20,000 (around USD 28 at official exchange rates) in December 2019. The average monthly salary prior to the increase was SYP 40,000 (USD 92) while the average monthly salary for employees Chart 3: Food-items national average price changes (SYP/Kg or Lt) vs informal in Syria in 2011 was about SYP 20,000 (USD 426, at then official exchange rate). exchange rate between December 2019 and January 2020 Moreover, from the 1st of February 2020, The Syrian Government is planning to enact a country-wide system of quotas and subsidies on rice, sugar and tea in order to increase Syrian people’s access to food items. These subsidies are in addi- tion to the already subsidized bread, diesel and butane gas. Impact on food-item prices Throughout 2019, a strong correlation between the depreciation of the informal exchange rate and the increase in national average food-items prices was identi- fied (0.99 for Egyptian white rice, 0.95 for vegetable oil, 0.95 for wheat flour and 0.98 for sugar). Highlighting the strong exchange rate influence on the prices of several food items. Source: WFP As a result of the continued depreciation of the Syrian Pound on the informal market, many commodities’ prices have continued to increase in January 2020 especially those that are directly imported such as vegetable oil (up ten percent m-o-m), rice (up 15 percent m-o-m), sugar (up 17 percent m-o-m) and wheat flour (up eight percent m-o-m) - Chart 3.

Across Syria, many retailers are finding it harder to restock not only because of the depreciating exchange rate but also as some repackaging factories are 2 re- maining closed more often due to the high cost of imports affecting production. Some retailers have reported minimizing trade volumes as a coping measure.

Staple cereals retail prices Chart 4: Retail Prices of Wheat Flour, SYP Wheat Flour In January 2020, the national average retail price of wheat flour throughout Syria increased by eight percent (m-o-m) reaching SYP 396/Kg. The highest m-o-m increase was reported in Idleb (up 35 percent) followed by Damas- cus (up 27 percent). The highest average recorded wheat flour price was in Al-Hasakeh at SYP 575/Kg followed by Ar-Raqqa at SYP 475/Kg. Conversely, the lowest average wheat flour price was recorded in Homs and Dar’a at SYP 356/Kg (up two percent and three percent respectively from last month) followed by Rural Damascus at SYP 357/Kg (up seven percent m-o- m). Broken down by accessibility, Idleb reported the highest retail price at Chart 5: Retail Prices of Rice, SYP SYP 450/Kg (up 35 percent m-o-m), while accessible areas reported the lowest retail price at SYP 390/Kg (up seven percent m-o-m) - Chart 4.

Rice The national average retail price of Egyptian white rice increased by 15 percent from last month reaching SYP 693/Kg in January 2020. The highest m-o -m price was reported in Dar’a at SYP 860/Kg (up nine percent m-o-m) followed by Al-Hasakeh at SYP 858/Kg (up two percent m-o-m). The lowest price was reported in Aleppo at SYP 550/Kg (up two percent m-o-m) followed by Homs at SYP 555/Kg (up two percent m-o-m). M-o-m, hard-to- reach areas reported an increase of 14 percent reaching SYP 668/Kg, acces- Chart 6: Retail Prices of Bulgur, SYP sible areas reported an increase of 14 percent reaching SYP 694/Kg and Idleb reported an increase of 45 percent reaching SYP 717/KG (Chart 5).

Bulgur The national average price of bulgur was SYP 492/Kg representing an increase of 13 percent from December 2019. The highest bulgur retail price was reported in Dar’a at SYP 571/Kg (up 25 percent m-o-m) followed by Al- Hasakeh at SYP 567/Kg (up 15 percent m-o-m). The lowest bulgur retail price, on the other hand, was reported in Aleppo at SYP 391/Kg (up 19 percent m-o-m). Idleb reported the highest average bulgur prices by accessibil- Chart 7: Retail Prices of Subsidized Bread, SYP ity at SYP 517/Kg with an increase of 45 percent from last month. Hard to reach areas reported an increase of 12 percent reaching SYP 461/Kg, and accessible areas also reported an increase of 12 percent reaching SYP 493/ Kg.

Bread prices In January 2020, the national average price of public bread (government subsidized bread) decreased by five percent reaching SYP 53/bundle (Chart 7). Seven governorates reported public bread price of SYP 42/bundle (1.3 kg) while six governorates reported an average of SYP 72/bundle2. Chart 8: Retail Prices of Commercial Bread, SYP

Moreover, the national average price of commercial bread across Syrian markets was SYP 119/bundle (1.3 kg) decreasing by four percent from last month (Chart 8). For commercial bread the highest price continued to be reported in Idleb at SYP 495/bundle (up seven percent m-o-m). The increase in food and non-food items in Idleb is a result of the continued intense fighting in the area as well as the continued closure of supply routes from North-East Syria resulting in overall higher prices and has also led to a decrease in the bread bundle weight sold. Homs reported the lowest average price of commercial bread at SYP 64/bundle (up one percent m-o-m). Source: WFP Field Offices 3 2. Idleb governorate is excluded from the national average price of public bread because public bread is not subsidized there. Chart 7 has been modified to reflect the national average price without Idleb.

Diesel and butane gas prices Chart 9: Diesel Prices, SYP Diesel prices decreased by 13 percent from last month but increased by 42 percent from January 2019 to reach SYP 330/litre (Chart 9). The highest average price by governorate was reported in Idleb at SYP 810/litre. The increase in Idleb is led by supply disruptions as many supply routes from North East Syria (NES) are now closed due to the Turkish ‘buffer zone’ in NES. The lowest average price was reported in Al-Hasakeh at SYP 100/litre (unchanged m-o-m).

Broken down by accessibility, the highest average diesel price was recorded in Idleb at SYP 810/litre (up 14 percent m-o-m), while the lowest average diesel price was recorded in accessible areas at SYP 307/litre (down 15 percent from last month). Moreover, the average price in hard-to-reach areas decreased by 16 percent reaching SYP

376/litre. Chart 10: Butane Gas prices, SYP

The national average refill price of one butane gas cylinder (25,000 liters) increased by two percent from last month to reach SYP 4,723/ refill. Aleppo reported the highest refill price at 9,373/refill (up 21 percent m-o-m), while As-Sweida reported the lowest refill price at 2,700/ refill (unchanged m-o-m).

M-o-m, accessible areas reported an average price of SYP 4,295/refill (up one percent m-o-m) while hard-to-reach areas reported a price of SYP 7,275/refill (up seven percent m-o-m). Additionally, Idleb reported an increase of 18 percent from last month reaching SYP 9,892/refill (Chart 10). Y-o-y, Idleb reported the highest increase in refill prices (up 105 percent) followed by hard-to-reach areas (up 83 percent). Table 2: National average wholesale prices for wheat, bulgur and rice,

SYP and USD using official exchange rate, 1 MT Cereal wholesale prices Commodity January Prices January Prices % Change (1 Mt) (SYP) (USD) (m-o-m) In January 2020, the national average wholesale price of cereals in- Wheat grain 268,440 619 4% creased by four percent for wheat grain reaching SYP 268,440/MT and by 16 percent for Egyptian white rice reaching SYP 610,673/MT. The Bulgur 421,939 972 10% national average wholesale price for bulgur was SYP 421,939/MT (up Rice 610,673 1,407 16% ten percent m-o-m). Source: WFP Field Offices Using the Syrian Central Bank’s official exchange rate of SYP 434 per USD, this translates to USD 1,407/MT for Egyptian white rice, USD Chart 11: FAO food price and cereal index 972/MT for bulgur grain, and USD 619/MT for wheat grain/MT (Table 2). The wholesale price of wheat on international markets was USD 212/MT, which is 66 percent lower than in Syria.

International Food and Cereal Price Index In January 2020, the FAO food Price Index averaged 182.5 points (up 0.7 percent m-o-m). Food prices increased in January mostly because of the global increase in sugar and vegetable oil prices.

The FAO Cereal Price Index averaged 169.2 points in January 2020 compared to 164.3 points in December 2019 (up 2.9 percent). The increase is mainly driven by a general rise in major cereals prices especially wheat flour. Source: FAO

Terms of Trade (ToT)3 Chart 12: Daily wage for unskilled labour, SYP ToT between wage labour and wheat flour The national average non-skilled labour wage was SYP 2,670/day in January 2020 (up three percent m-o-m). The wage rate was 27 percent above its y- o-y level and ten percent above levels recorded in July 2019 (Chart 12).

Only three out of the 14 governorates reported unchanged m-o-m daily unskilled wage levels in January 2020. The highest daily non-skilled wages were reported at SYP 4,500/day in Lattakia (up six percent m-o-m) and Tartous (unchanged m-o-m). Daily non-skilled labour wages were still reported lowest in Al-Hasakeh at SYP 1,600/day (up one percent m-o-m) followed by As-Sweida at SYP 2,050/day (up nine percent m-o-m).

The national average ToT between wheat flour and wage labour, a proxy indicator for purchasing power, decreased by five percent m-o-m. Com- Chart 13: Terms of Trade (ToT) between wheat flour and wage labour pared to July 2019, the national average ToT between wheat flour and wage labour decreased by 22 percent. It decreased by 16 percent compared to January 2019 (Chart 13), highlighting a worsening purchasing power trend.

The recent decrease was due to wheat flour price increasing more than the non-skilled labour wages. As a result the national average daily wage of a non-skilled labourer could only buy 6.7 kg of wheat flour in January 2020 compared to 7.1 kg of wheat flour in December 2019 and 8.7 kg of wheat flour in July 2019.

ToT between sheep and wheat flour Chart 14: Price of livestock, SYP/one 2Y old sheep The national average price of a two-year old alive male sheep increased to SYP 192,637/sheep in January 2020, up 11 percent m-o-m (Chart 14). The increase in sheep prices is linked to the depreciation of the Syrian Pound that caused fodder prices to go up.

Dar’a reported the highest average price across Syria at SYP 266,000/sheep (up 32 percent m-o-m) followed by Lattakia at SYP 205,000/sheep (up 23 percent m-o-m). As-Sweida reported the lowest average price for an alive two-year old male sheep at SYP 136,250/sheep (up seven percent m-o-m) followed by Quneitra at 174,000 (up five percent m-o-m).

In January 2020, the ToT between an alive two-year old male sheep and wheat flour was 486 kg/sheep (up two percent m-o-m). Highlighting an Chart 15: Terms of Trade (ToT) between wheat flour and the price of a 2 year improvement for livestock owners who could buy on average two percent old sheep more kgs of wheat flour compared to December 2019.

Broken down by accessibility, more accessible areas reported an increase of one percent from December 2019, reaching 495 kg of wheat flour/sheep and more hard-to-reach areas reported an increase of 23 percent reaching 435 kg of wheat flour/sheep. Conversely, Idleb reported a decrease of 20 percent m-o-m reaching 411 kg of wheat flour/sheep (Chart 15).

Compared to January 2019, more accessible areas reported an increase in wheat flour/sheep ToT of 31 percent, more hard-to-reach areas reported an increase of 56 percent due to increases in livestock prices surpassing wheat flour prices. Idleb, on the other hand, reported a y-o-y decrease of 17 percent. Source: WFP Field Offices 3. The ToT are proxy indicators of the purchasing power of households that rely on livestock and/or casual labour as their main source of income for the purchase of cereals from local 5 markets. ToT are important components of food security analysis. Changes in the terms of trade between wages/livestock and staple food commodities are indicative of the trends in purchasing power and the impact on the food security situation of households dependent on food purchases through income from daily wage labour and/or the sale of livestock.