MGA - Malagasy Ariary

Overview of the Malagasy Ariary (MGA)

The Malagasy Ariary is the official currency of Madagascar, symbolized as Ar, with the ISO 4217 code MGA. One Ar is divided into 5 iraimbilanja, instead of 100 like in other countries. This currency is issued and managed by the Central Bank of Madagascar.

The Madagascar Ariary or MGA is the official currency of the Republic of Madagascar. Along with the ouguiya of Mauritania, this is one of the two non-decimal currencies still in circulation, with one MGA divided into 5 iraimbilanja, instead of 100 like other currencies. However, as of May 2023, this unit has become obsolete because the iraimbilanja has no purchasing power, so these coins are no longer in use.

History of the Malagasy Ariary (MGA)

Madagascar issued its own currency before becoming a French colony. The names of Madagascar's currency are Ariary and Iraimbilanja. This is an ancient currency system in which each Ariary is divided into 5 Iraimbilanja, not following the decimal system like modern currencies.

By 2005, after gaining independence, Madagascar had transitioned from the old currency system to the Ariary, marking the restoration of the pre-colonial currency system.

On the other hand, Madagascar also went through many different monetary phases before establishing its own currency. At the end of the 19th century, the country mainly relied on barter and used metal coins such as copper, silver, and gold brought by Arab, Indian Ocean, and European traders. In 1896, after becoming a French colony, the Franc became the official currency and was converted into the Malagasy Franc (also known as Malagasy Franc, issued specifically for Madagascar) in 1925.

After independence, the Malagasy Franc continued to be used as the official currency of the country. At the same time, Madagascar also continues to maintain close ties with the French financial system and the CFA Franc currency.

The currency units that were once used in Madagascar

• French Franc: Used during the period 1896 – 1925

• Malagasy Franc: Used during the French colonial period from 1925 – 2005

• Madagascar Ariary: Used in the post-independence period from 2005 to present, replacing the Malagasy Franc (MGF), which was the official currency of Madagascar since the country gained independence from France in 1960.

Malagasy Ariary (MGA) Denominations

The Ariary currency exists in both forms: coins and banknotes. The current denominations include:

• Coins: 1, 2, 4, 5, 10, 20, 50 Ariary

• Banknotes: 100, 200, 500, 1,000, 2,000, 5,000, 10,000 Ariary 

Malagasy Ariary (MGA) exchange rate and role

Madagascar pursues a floating exchange rate regime, in which the value of the Ariary is determined based on market supply and demand. The Central Bank of Madagascar can intervene in the foreign exchange market when necessary to ensure monetary stability and prevent excessive fluctuations of the Ariary.

The value of the Ariary is often influenced by many factors, including the country's trade balance, the prices of exported goods such as vanilla, oil, minerals, and rice, as well as the global economic situation. Although Madagascar still faces many economic challenges, the Ariary plays an important role in the national financial system and is a symbol of Madagascar's monetary sovereignty.

History of Malagasy Ariary (MGA) exchange rate

After the Ariary was issued, its exchange rate against the US dollar (USD) experienced many fluctuations.

• In the early years, due to the unstable domestic financial and economic situation, the exchange rate fluctuated significantly, around 2,600 – 2,800 MGA ~ 1 USD.

• In the period from 2011 to 2015, the exchange rate continued to fluctuate significantly due to rising inflation and political instability. The exchange rate during this period exceeded the threshold of 2,800 – 3,400 MGA ~ 1 USD and continued to maintain this level until the 2015 – 2020 period.

• From 2021 to now, due to prolonged economic instability, the MGA/USD exchange rate has shown a slight upward trend, fluctuating between 3,800 – 4,200 MGA ~ 1 USD. 

Exchange rate with other currencies

• Chinese Yuan (CNY): Due to the close diplomatic relations between Madagascar and China, the exchange rate of the Renminbi against the Ariary has been quite stable over the years, at around 1 CNY ~ 450 – 600 MGA.

• Japanese Yen (JPY): The exchange rate of the Japanese Yen against the Ariary has also remained stable in recent times, at around 1 JPY ~ 25 – 30 MGA.

The exchange rate of the Ariary against foreign currencies depends on many economic and political factors, but the floating exchange rate policy of the Central Bank of Madagascar plays an important role in maintaining stability and making adjustments as necessary.

Factors affecting the value of the Malagasy Ariary (MGA)

The value of the Malagasy Ariary (MGA) is influenced by a myriad of factors, including inflation rates, trade balances, and foreign exchange reserves. Economic stability, driven by both domestic production and international trade dynamics, plays a critical role in determining the currency's strength. Additionally, political stability and government policies directly impact investor confidence and, consequently, the exchange rate. External factors such as global economic trends and commodity prices also exert significant influence on the value of the MGA, underscoring the interconnectedness of local and international markets.