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WASHINGTON, Jan 26 (Reuters) - Syria’s pound may be a little overvalued on a real effective exchange rate basis, though the country for now should just pave the way to eventually move to greater currency flexibility, the IMF said on Monday.
The International Monetary Fund, in its regular update on the Syrian economy, said it expects the country’s economy grew by roughly 5 percent last year and that Syria will be only mildly affected by the global financial crisis.
The IMF, in a statement, said, “Directors did not recommend any change in the exchange rate level in the present context.
“Directors encouraged the authorities to prepare the ground for a gradual move toward greater exchange rate flexibility over the medium term,” the fund said.
The IMF said it expects the Syrian economy grew last year despite declining output from its oil industry, but it estimated that inflation accelerated sharply to around 15 percent on average, versus 5 percent in 2007.
“The impact of adverse global and regional developments on the Syrian economy is expected to be relatively mild in the short term. The effects are likely to be through weakening foreign direct investment, remittances, and demand for Syrian exports from the Gulf region,” the IMF said.
The country’s fiscal deficit steadied around 3.5 percent of gross domestic domestic product in 2008, the IMF said, after the government phased out fuel subsidies. To strengthen public finances further, the IMF encouraged Syria to introduce a value added tax next year.
“Vigorous implementation of the authorities’ substantial structural reform agenda will be crucial to accelerate the shift to a more market-oriented and non-oil-based economy,” the IMF said. (Reporting by Alister Bull; Editing by Leslie Adler)