Political sketch
Formerly known for a time as the Malagasy Republic. Independent from France on 26 June 1960.
The people of Madagascar are of mixed Malay, African, and Arab ancestry. The Merina people, who predominate in the interior of the country, became the dominant kingdom around 1800 and in the early 1800s brought a large part of the country under their control. In 1890, as part of the division of Africa among the European powers, the British recognized French influence in Madagascar. The French, who had already established control over part of the coast, proceeded to conquer the rest of the country. They abolished slavery in 1897, although forced labor continued. Madagascar became an exporter of agricultural products. During the Second World War, Madagascar's French administrators sided with the French government of Vichy, which was something between neutral and allied with Germany. An invasion force of British Empire troops invaded on 5 May 1942; the French forces surrendered on 29 September 1942. The British temporarily administered Madagascar before passing control to the Free French government in exile in 1943. In 1946 Madagascar became an overseas territory of France with parliamentary representation. A brief revolt in favor of independence occurred in 1947-1948. On 14 October 1958 the autonomous Malagasy Republic was proclaimed as part of the French Community, following an election earlier in the year in which Madagascar's voters had expressed a preference for autonomy.
Madagascar became independent on 26 June 1960, in the great wave of French African colonies that year. Initially Madagascar remained closely connected to France. In October 1972 the president resigned in the face of protests about economic and political issues; a military regime took over. Madagascar nationalized key industries and attempted to establish a centrally planned economy. The failure of socialism to bring economic growth led to a gradual move back towards a market economy starting in 1986. In 1990 opposition political parties were legalized, but in 1991 the constitution that had been adopted in 1975 was suspended. A transitional government was established until a new constitution was approved in 1992 and presidential and legislative elections were held in 1993. The next transition of the presidency, in 2002, was marked by a contested election followed by a brief civil war. The civil war played on the longstanding division between the Merina and the ethnic groups of the coast. The Merina candidate became the new president. The main export for many years was vanilla; coffee was also important. In recent years manufactured goods, especially textiles, have become the main export. Madagascar is among the poorest countries in the world.
Wars since 1500
Merina Conquest of Madagascar, 1810-1817; Madagascar Wars with France, 1883-1885, 1895; Second World War in Madagascar, 1942 (United Kingdom against local Vichy-allied French colonial regime); Madagascar Revolt of 1947-1948; Madagascar Civil War of 2002.
Convertibility
The French franc zone:
When the First World War began, France imposed a moratorium of payments on all negotiable instruments starting 1 August 1914. The moratorium was subsequently extended by decrees until 1 March 1915. The central bank, the Bank of France, abandoned the gold standard on 5 August 1914, although no official prohibition on exporting gold existed until by a decree of 3 July 1915, affirmed by a law of 15 November 1915. A decree of 2 April 1918 prohibited capital exports without authorization. A law of 25 June 1928 officially restored the gold standard and repealed exchange controls. When the French franc was an object of currency speculation , a law of 13 August 1936 imposed extensive exchange controls, supplementing some lesser measures that had been implemented in 1935.
France imposed exchange controls on 9 September 1939 by a decree of that date, soon after the Second World War broke out. On 20 May 1940, capital controls within the franc zone were greatly relaxed by a French decree of that date. However, communication between Madagascar and France was limited. Madagascar became part of the Free French monetary area linked to the pound sterling after a British invasion in 1942 dislodged local administrators who supported the Vichy regime. Exchange controls within the franc zone were not removed until 6 June 1946. Afterwards, the CFA franc became convertible both for current- and capital-account transactions within the French franc zone (France, Monaco, And French possessions, including countries using the CFA franc). Outside the French franc zone it became convertible for current-account transactions when France resumed current-account convertibility, but it was not convertible for capital-account transactions. France had multiple exchange rates from 26 January 1948 until 17 October 1948, and a dual exchange rate from 18 October 1948 to 29 September 1949. On 20 September 1949 it devalued the French franc and unified the exchange rate, taking advantage of the lead offered by the United Kingdom, which had devalued the pound sterling on 18 September 1949.
The CFA franc zone:
All independent countries belonging to the CFA franc zone except Mali issued laws or decrees stating that effective 1 July 1967, financial relations with foreign countries were in principle free. Madagascar (then called the Malagasy Republic) issued similar legislation on the same date; Mali waited until 29 March 1968. The CFA franc zone countries were following earlier French legislation (France, Law No. 66-1007, 28 December 1966; Decree No. 67-78, 27 January 1967, effective 31 January 1967). France reintroduced exchange controls on 29 May 1968, during a period of strikes and riots (France, Decree No. 68-481, 29 May 1968). It removed controls on 4 September 1968 (France, Decree No. 68-788, 4 September 1968) but reimposed them on 25 November 1968 (France, Decree No. 68-1021, 24 November 1968) before revoking them on 1 January 1969. The CFA franc zone countries, including Madagascar, all strengthened their exchange controls against countries outside the French franc zone in 1968, following France, and loosened them in January 1969. France introduced a dual exchange rate on 21 August 1971 for itself and its French franc zone territories, which excluded Djibouti (France, Ministry of Economy and Finance, Circulaire du 20 août 1971 relative à l'exécution des transferts à destination de l'étranger, 20 August 1971). The CFA franc zone countries, including Madagascar, followed suit on these dates in 1968: Cameroon and Congo-Brazzaville, 28 August; Burkina Faso (then called Upper Volta) and Côte d'Ivoire (Ivory Coast), 30 August; Gabon and Senegal, 31 August; Mauritania, 1 September; Chad, 3 September; Madagascar and Niger, 4 September; Togo, 7 September; Central African Republic, sometime in September; Benin (then called Dahomey) and Mali, 9 September. All except Madagascar and Mauritania abolished the dual market on 21 March 1974, the same day as France (France, Ministry of Economy and Finance, Circulaire du 20 mars 1974 relative à l'exécution des transferts entre la France et l'étranger sur le marché officiel des changes, 20 March 1974). Madagascar had withdrawn from the French franc zone effective 1 July 1973, and its dual market had ended on that date. Mauritania had introduced a new national currency on 29 June 1973 to replace the CFA franc, and its dual market had ended on that date. The dual exchange rate did not apply to transactions within the French franc zone, so purchases and sales of French francs for CFA francs continued to be made at a single rate, the official rate, which was a pegged rate. Certain purchases and sales of currencies outside the French franc zone had to be made at the so-called financial rate, which was a floating rate.
Madagascar alone:
Madagascar extended exchange control to the French franc zone on 20 May 1972 (Malagasy Republic, Decree No. 72-148, 20 May 1972, extended by Decree No. 72-446, 25 November 1972); it left the CFA franc and French franc zones on 1 July 1973 (France, Circular of 29 June 1973 Relating to Financial Relations with the Malagasy Republic; Madagascar, government announcement of 22 July 1973).
Other
The French government established the CFA franc on 26 December 1945. The CFA franc became the unit of account in French colonies in sub-Saharan Africa and the Americas that had previously used a local franc equal to the French franc. Local francs in North Africa (Algeria, Tunisia, and Morocco) and Djibouti remained in effect fully attached to the French franc. French colonies in the Pacific established a unit of account called the CFP franc, while Indochina, Syria and Lebanon, and Pondicherry (India) already had currencies that were not called francs. The CFA franc enabled the French government to make exchange rate policy in the colonies different from that in France. When making devaluations of the French franc against gold and the US dollar on 26 December 1945 and 17 October 1948, the French government devalued the CFA franc less, implying a revaluation against the French franc. The meaning of "CFA" was initially Colonies Françaises d'Afrique (colonies of France in Africa). In Africa, the meaning changed when the colonies established central banks in preparation for political independence. CFA came to mean Communauté Financière Africaine (African financial community) for the member countries of the Banque Centrale des États de l'Afrique de l'Ouest (BCEAO, opened 4 April 1959). It came to mean Coopération Financière en Afrique Centrale (financial cooperation in Central Africa) for the member countries of the Banque Centrale des États de l'Afrique Équatoriale et du Cameroun (BCEAC, also opened 4 April 1959), which since 22 November 1972 has been called the Banque des États de l'Afrique Centrale (BEAC). After Madagascar opened a monetary institute on 1 July 1963 to take over issuance of the local currency, the local currency was called the Malagasy franc.
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 1981-2002 (foreign currency bank debt, oil and interest rate shocks), 2002 (local currency debt, civil war).
Reinhart and Tokatlidis (2000: 33) dating of recent financial liberalization: Domestic (notably interest rates) 1994, external (notably foreign-exchange market and participation by foreign financial institutions) 1996.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): In 1988, 25% of banking sector loans were deemed irrecoverable; problems 1991-1995.
Frankel and Rose (1996) list of currency crashes: 1981, 1987.
The capital, called Antananarivo in the Malagasy language, was known through much of the 1900s as Tananarive in French.
References
Primary sources:
--Laws and decrees:
France. Gazette. 1762-present. Gazette de France (1762-1789); Gazette nationale de France (1789-1799); Bulletin des lois (1791-1831; a separate publication); La gazette nationale ou le moniteur universel (1799-1810); Moniteur universel (1811-1848); Moniteur universel: journal officiel de la République française (1848-1852); Journal officiel de l'Empire français (1852-1870); Journal officiel de la République française (1871-1941); Journal officiel de l'État français (Vichy France, 1941-1944); Bulletin officiel des Forces françaises libres (Free France, 1940-1941); Journal officiel de la France libre (Free France, 1941); Journal officiel de la France combattante (Free France, 1941-1943); Journal officiel du Haut commissariat de France en Afrique (Free France, 1943); Journal officiel du Commandement en chef français en Afrique (Free France, 1943); Journal officiel de la République française (Free France, 1943-1944; France, 1944-present). Paris (1762-1940, 1944-present); Vichy (1940-1944); London (Free France, 1941-1943); Algiers (Free France, 1943-1944): Imprimerie des Journaux Officiels (1944?-present). Many issues are in France, Legifrance Web site (see below).
France. Legifrance Web site, <http://www.legifrance.gouv.fr>. Reference site for French treaties, laws, and decrees, including the full text for recent items.
France. Overseas gazette. 1887-1961. Bulletin officiel (1887-1953; new series, 1953-1959); Bulletin officiel de l'administration provisoire des services du Ministère de la France d'Outre-Mer (1959-1961). Issued by Ministère des Colonies (1887-1950); Ministère de la France d'Outre-Mer (1950-1961). Paris: Imprimerie Nationale.
Madagascar. Gazette. 1883-present. Ny Gazety malagasy (1883-1896; also called Journal officiel de Madagascar et ses dépendances 1896-1896 in French); Journal officiel de Madagascar et dépendances (1896-1958); Journal officiel de la République malgache (1958-1965); Journal officiel de la République malagasy (1965-1972); Gazetim-panjakan' ny Repoblika Malagasy) (1972-1975); Gazetim-panjakan' ny Repoblika demokratika malagasy (1975-1992); Gazetim-panjakan' ny Repoblikan'i Madagaskara (1992-present). Tananarive [Antananarivo]: Imprimerie Nationale de Madagascar (1896-1958); Imprimerie Officielle (1958-1975); Antananarivo: Tranopirintim-pirenena (Imprimerie Nationale) (1975-present). (The gazette includes material in French or has a French version for at least some years in which its title is in Malagasy.)
--Publications of monetary authorities:
Banque Centrale de la République Malgache. Annual report. 1973?-1977? Rapport d'activités. Antananarivo: Banque Centrale de la République Malgache. (I have found no record of whether the central bank under this name ever published an annual report.)
Banque Centrale de Madagascar. Annual report. Annual report. 1977?-present. Rapport d'activités. Antananarivo: Banque Centrale de Madagascar.
Banque de France. Annual report. 1800-1925. Assemblée générale des actionnaires de la Banque de France. Paris: Imprimerie de la Banque de France (1800-?); Imprimerie Paul Dupont (?-1925).
Banque de Madagascar. Annual report. 1926?-1950. Comptes rendus. Paris: Banque de Madagascar.
Banque de Madagascar et des Comores. Annual report. 1951-1963. Conseil d'administration. Assemblée générale ordinaire et assemblée générale extraordinaire du ...; rapport du Conseil d'administration, rapports des commissaires aux comptes, résolutions, bilan de l'exercise (title varies) Paris: Banque de Madagascar et des Comores.
Institut d'Émission Malgache. Annual report. 1962/1963-1972. Rapport d'activité. Tananarive [Antananarivo]: Institut d'Émission Malgache.
--Web site of the current monetary authority (viewed 20 September 2005):
<http://www.banque-centrale.mg>
--Other publications or Web sites:
Comité Monétaire de la Zone Franc. Secrétariat. 1953-present. Premier [etc.] rapport annuel du Comité de la zone franc établi en exécution du décret du 5 fevrier 1952 (art. 4, §2) (1953-1956); La zone franc en 1957: cinquième rapport annuel du Comité Monétaire de la Zone Franc (1957); La zone franc en ...: rapport publié par le Secrétariat du Comité Monétaire de la Zone Franc (1958-1983); La zone franc: rapport ...: publié par le Secrétariat du Comité Monétaire de la Zone Franc (1984-1991); La zone franc: rappport annuel ...; publié par le Secrétariat du Comité Monétaire de la Zone Franc (1992-2003; inside page says La zone franc en ...); Rapport annuel de la zone franc (2004-present; inside cover says La zone franc: rapport annuel ...). Paris: Imprimerie Nationale (1953-1956); Secrétariat du Comité Monétaire de la Zone Franc (1957-1991; 1957 is a mimeo with no explicit publication information); Banque de France (1992-present). Recent issues are available on the Web site of the Banque de France, <http://www.banque-france.fr/fr/eurosys/zonefr/zonefr.htm>.
France. Commision de Surveillance des Banques Coloniales. 1875-1939. Rapport au président de la république sur les opérations des banques coloniales d'émission pendant l'exercise ... (1873/1874-1936/1937); Rapport au président de la république sur les opérations des banques coloniales d'émission ... (1927/1929-1936/1937). Paris: Imprimerie Nationale.
Main secondary sources:
Azaïs, Etienne. 1996. Mon parcours du combattant: à travers la banque et ses filiales en Afrique et à Madagascar. [Mandelieu, France]: E. Azaïs. (I have not seen this.)
BCEAO. 1966. Banque Centrale des États de l'Afrique de l'Ouest. Notes d'information et statistiques, issue "L'Afrique des monnaies," January 1966. Paris: Banque Centrale des États de l'Afrique de l'Ouest.
Campbell, Gywnn. 2005. An Economic History of Imperial Madagascar, 1750-1895: The Rise and Fall of an Island Empire. Cambridge: Cambridge University Press.
Chauvicourt, J., and S. Chauvicourt. 1965-1969. Numismatique malgache, fascicules 1-5. Tananarive [Antananarivo]: no publisher.
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Leduc, Michel. 1965. Les institutions monétaires africaines: pays francophones. Paris: Éditions A. Pedone.
Madagascar, cent ans d'expériences bancaires: 1886 à 1986. 1987. Commissioned by Bankin' ny Tantsaha Mpamokatra; edited by Louis-Bernard Rakotomanga; co-authored by Emilienne Rasoamalala and others. Antananarivo: Bankin'ny Tantsaha Mpamokatra.
Mazard, Jean. 1953. Histoire monétaire et numismatique des colonies et de l'Union française, 1670-1952. Paris: Émile Bourgey.
World Currency Yearbook. 1984-1990/93. Brooklyn, New York: International Currency Analysis. Previously called Pick's Currency Yearbook (1955-1979) and Pick's World Currency Report (1980-84). New York: Pick Publishing Corporation.
World Bank. 1993. Madagascar: Financial Policies for Diversified Growth. Washington: World Bank. (Also released in French.)
Monetary authorities: Madagascar
| Dates | Type | Name | Source | Remarks |
| 1885
-April 1926 |
dollarization | French franc (issued by central bank Banque de France [headquarters Paris, France]) was dominant in practice initially, and later officially sanctioned at the only currency | Madagascar, cent ans d'expériences bancaires (1987: 13); Institut d'Émission Malgache annual report 1962/1963: 3-5 | The first bank was the Comptoir d'Escompte de Paris (headquarters Paris, France), in Diego-Suarez (Antsiranana), in 1885. It was established in connection with a politically motivated loan that was an outgrowth of a peace treaty Madagascar signed in 1885 after losing a war with france. The second bank was the New Oriental Bank (headquarters London, England), in Tamatave?, in 1888 (Campbell 2005: 310). However, the branch was not durable. The second durable bank was either the Crédit Foncier de Madagascar or the Banque de l'Océan Indien (headquarters for both Paris, France?), which both established offices in Tananarive (Antananarivo) in 1920. Before this period, Madagascar used a variety of foreign coins and primitive monies. |
| April 1926
-31 December 1950 |
private monopoly issue (as part of a currency union with Comoros) | Banque de Madagascar (headquarters Paris, France) | France, law of 22 December 1925, reprinted in Madagascar, cent ans d'expériences bancaires (1987:50-4); Institut d'Émission Malgache annual report 1962/1963: 6 | This law was passed after an agreement of 1 July 1925 between the French government and the Banque de Paris et des Pay-Bays to create the Banque de Madagascar, whose first branch in Madagascar was in Tananarive (Antananarivo). The first local coins under French rule were issued in 1943 by the Free French government. |
| 1 January 1951
-31 March 1962 |
central bank (with majority government ownership and commercial banking functions) (as part of a currency union with Comoros) | Banque de Madagascar et des Comores (headquarters Paris, France) | France, Law No. 50-375, 29 March 1950; Decree No. 50-1425, 16 November 1950 | The French government received majority (56%) ownership of the Banque de Madagascar et des Comores. The name of the bank was changed to include reference to the Comoros in recognition of its operations there. French policy had been to nationalize note issue since the 1930s and after Second World War to nationalize banks. |
| 1 April 1962
-30 June 1973 |
monetary institute | Institut d'Émission Malgache or Famoahamboan'ny Repoblika Malagasy (headquarters Tananarive [Antananarivo], Madagascar) | France and Madagascar, Accord de coopération en matière économique et financière entre la République Française et le République Malgache, 26 June 1960; Convention rélative au Compte d'opérations de l'Institut d'Émission Malgache, 10 March 1963; Statuts de l'Institut d'Émission Malgache, 10 March 1963; all these reprinted in Institut d'Émission Malgache annual report 1962-1963: 58-72; Malagasy Republic, Arrêté No. 1142, 18 May 1962, cited in BCEAO (1966: 8) | The currency issuing functions of the Banque de Madagascar et des Comores separated from its commercial banking functions in accord with the belief that note issue was most properly a function of government, not of a bank. The monetary institute had a board of directors half appointed by France, half by Madagascar. The Banque de Madagascar et des Comores operated the monetary institute through 31 December 1963 (Institut d'Émission Malgache and Banque de Madagascar et des Comores, agreement of 10 March 1962). The monetary institute took over issuance of coins from the Madagascar Treasury. Madagascar joined the IMF on 25 September 1963. |
| 1 July 1973
-January 1977 |
central bank | Banque Centrale de la République Malgache (headquarters Antananarivo, Madagascar) | Malagasy Republic, Ordonnance No. 73-025, 12 June 1973, cited in Banque Centrale de Madagascar Web site, viewed 19 September 2005 | Madagascar established a central bank with no French participation upon leaving the CFA franc zone. Madagascar nationalized all banks on 16 June 1975 (IMF ARER 1975: 299). |
| January 1977
-August 1989 |
monobank | Banque Centrale de la République Malgache / Banque Centrale de Madagascar or Banky Foiben'i Madagasikara from June 1976? (headquarters for both Antananarivo, Madagascar) | Madagascar, Supreme Council of the Revolution, 16 June 1975, cited in Madagascar, cent ans d'expériences bancaires (1987: 92) | Madagascar established a centrally planned economy. Bank were reorganized to specialize in particular sectors. |
| August 1989
-present (2005) |
central bank | Banque Centrale de Madagascar or Banky Foiben'i Madagasikara (headquarters Antananarivo, Madagascar) | Madagascar, banking law of May 1988, cited in World Bank (1993: 71-2) | A new banking law of May 1988 allowed privately owned banks. The first privately owned bank, Banque de l'Océan Indien (headquarters Antananarivo, Madagascar) opened in Antananarivo at the start of this period. The government sold shares in the banks it owned, partly privatizing them, starting in February 1991. |
Exchange rate arrangements: Madagascar
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 26 January 1872
-1881 |
fixed; used Spanish, Mexican, and Bolivian silver dollars (piastres) | Madagascar, kabary (royal decree) of 26 January 1872, cited in Chauvicourt and Chauvicourt (fascicule 3, 1968: 36) | Cattle were also used as a medium of exchange, at 2 piastres = 1 head of cattle (Chauvicourt and Chauvicourt, fascicule 3, 1968: 3) | Initially, Malagasy authorities made no attempt to stipulate a particular coin as legal tender. Spanish silver piastres (also called pesos or Spanish dollars) had been accepted at least in practice well before this time. The French 5-franc piece was also widely used; according to one account, it was the dominant coin from midcentury (Campbell 2005: 288-9). |
| 1881
-1886 |
fixed; used Mexican and Spanishe silver dollars (piatres) and French 5 franc-piece | Madagascar, Merina Code of 29 March 1881, cited in Campbell (2005: 191); Banque Centrale de Madagascar Web site, viewed 19 September 2005 | The code stipulated which coins would be accepted as standard monies at par. | |
| 1886
-11 January 1900 |
fixed; used French franc and other currencies | Madagascar, kabary? (royal decree) of 1886 | In practice, by 1894, the French 5-franc piece was overwhelmingly dominant in use (Campbell 2005: 292). | Formal encouragement of the French franc began in 1886. Madagascar also used the ariary as a unit of account; it equaled 5 francs and sprang from the French 5-franc piece widely used for many years. The French franc was a decimal currency. |
| 12 January 1900
-April 1926 |
fixed; used French franc only | Madagascar, (French) governor general, arrêté of 12 January 1900, reprinted in Chauvicourt and Chauvicourt (fascicule 4, 1967: 53) | The French franc was made the sole legal tender after French conquest of island. "Cut money" (chopped-up 5-franc pieces used as change) was withdrawn from circulation by April 1900 (French governor general, arrêtés of 12 January and 21 February 1900, both reprinted in Chauvicourt and Chauvicourt, fascicule 4, 1967: 53). | |
| April 1926
-30 September? 1942 |
pegged (as part of a currency union with Comoros); 1 local franc = 1 French franc | France, law of 22 December 1925, reprinted in Madagascar, cent ans d'expériences bancaires (1987:50-4) | The Banque de Madagascar began operations, changing the exchange rate from fixed to pegged. Legally, local francs in what was to become the CFA franc zone were not separate from the French franc until 26 December 1945. | |
| 1 October? 1942
-7 February 1944 |
pegged (as part of a currency union with Comoros); 176.625 local francs = UKŁ1 (and later 43.80 local francs = US$1) | Anglo-Free French agreement of 19 March 1941, cited in Mazard (1953: 105) | Madagascar fell to Allied forces in the Second World War in late September 1942. The Anglo-Free French agreement of 1941 preserved the prewar exchange rate of the French franc with the pound sterling (and later with the US dollar, when the United States entered the Second World War). | |
| 8 February 1944
-5 December 1944 |
pegged (as part of a currency union with Comoros); 200 local francs = UKŁ1, or 50 local francs = US$1 | Anglo-Free French agreement of 8 February 1944, cited in Mazard (1953: 106) | The Anglo-French agreement devalued the French franc slightly to the level already prevailing in other territories under Free French control. | |
| 6 December 1944
-25 December 1945 |
pegged (as part of a currency union with Comoros); 1 local franc = 1 French franc | Anglo-Free French agreement of 8 February 1944, cited in Mazard (1953: 106) | Following the liberation of most of France by the Allies during the Second World War, the metropolitan French franc was devalued to the level of the overseas francs under Free French control. Doing so in effect restored the French franc as the anchor currency. | |
| 26 December 1945
-16 October 1948 |
pegged (as part of a currency union with Comoros); 1 (Madagascar-Comoros) CFA franc = 1.70 French francs | France, Decree No. 45-0136, 25 December 1945 | France created the CFA franc at a premium from the former 1-to-1 rate of local francs with the French franc. The premium offset most of French franc's devaluation from 50 to 119.10699 French francs = US$1 on 25 December 1945. The revaluation reflected lower wartime economic destruction in the colonies than in France. The new cross rate with the pound sterling was 300 CFA francs = UKŁ1. The name "franc" for the currency came from the French franc. For the meaning of CFA, see the category "Other" in the country information above. | |
| 17 October 1948
-31 December 1959 |
pegged (as part of a currency union with Comoros); 1 (Madagascar-Comoros) CFA franc = 2 old French francs, or 50 (Madagascar-Comoros) CFA francs = 1 new French franc | France, Ministry of Finance and Economic Affairs, Avis No. 352 de l'Office des Changes, 17 October 1948 | The CFA franc had followed the French franc's devaluation on 26 January 1948, but this time it was in effect revalued against the French franc to offset almost all of the French franc's devaluation from 214.392 to 264 French francs = US$1 on 17 October 1948. | |
| 1 January 1960
-29 June 1963 |
pegged (as part of a currency union with Comoros); 50 (Madagascar-Comoros) CFA francs = 1 new French franc | France, Ordonnance No. 58-1341, 27 December 1958; Ministry of Finance and Economic Affairs, Circulaire du 19 novembre 1959 relative au nouveau franc, 19 November 1959; Decree No. 59-1450, 22 December 1959 | France redenominated its franc at 1 new French franc = 100 old French francs. | |
| 30 June 1963
-3 September 1971 |
pegged; 50 Malagasy francs = 1 French franc | Madagascar, Decree No. 69-397 bis, 30 June 1963, reprinted in Institut d'Émission Malgache annual report 1962/1963: 73 | Madagascar created own franc. Members of CFA franc zone never registered gold parities with the IMF, and Madagascar did not do so after leaving the zone, either. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. | |
| 4 September 1971
-30 June 1973 |
pegged, dual rate; official rate 50 Malagasy francs = 1 French franc | IMF ARER (1972: 278) | The second rate, called the financial rate, was a managed or perhaps independent float. | Madagascar established a dual exchange rate market following a similar step by France on 21 August 1971. |
| 1 July 1973
-January 1977 |
pegged; 50 Malagasy francs = 1 French franc | IMF ARER (1974: 283) | Annual parallel market data from World Currency Yearbook (1985: 535) begin in 1976. The premium was initially low. | Ended the dual exchange rate upon leaving the CFA franc zone. Madagascarr's government had announced on 22 May 1973 that it would withdraw from the zone (IMF ARER 1974: 282). The move was part of a wider break with France resulting from the overthrow of the French-backed president. The initial exchange rate spread was 49.75-50.50 Malagasy francs = 1 French franc, whereas before no spread had existed. |
| January 1977
-1 April 1982 |
repressed (pegged); official rate 50 Malagasy francs = 1 French franc | Madagascar, Supreme Council of the Revolution, 16 June 1975, cited in Madagascar, cent ans d'expériences bancaires (1987: 92) | World Currency Yearbook (1985: 535) shows parallel market premiums of 0-40%. | Established a centrally planned economy. |
| 2 April 1982
-August 1989 |
repressed (flexible basket) (IMF: pegged to a composite of currencies to December 1986, adjusted according to a set of indicators from December 1986) | IMF ARER (1982: 306; 1984: 314; 1985: 324; 1986: 343; 1987: 328; 1988: 319) | Annual data from
World Currency
Yearbook (1985: 535)
show parallel market
premiums in the mid to
high double digits.
RR: Monthly parallel market data begin in January 1985. The parallel market premium ranges from mid double digits to zero, generally falling over time. Premium tends to decline over time. De facto crawling band around French franc; band width +/-2%. |
During a period of weakness in the French franc, switched the anchor to a basket of the currencies of major trading partners. The precise composition of the basket was not specified. The central bank devalued on 15 May 1982 by 13% against the basket; in terms of the US dollar, the exchange rate went from 303.21 to 350.92 Malagasy francs = US$1. Other devaluations against the basket and their dates were as follows: 31 January 1983, 5.7% (6% in local currency terms; from 375.27 to 397.42 Malagasy francs = US$1); 8 July 1983, 2%; 1 October 1983, 9.5%; 17 March 1984, 13%; 2 July 1984, 2%; 24 September 1984, 1.1%; 29 December 1984, 3.4%; 2 January 1985, 3.29%; 5 March 1985, 2.44%; 20 March 1985, 2.34%; 9 July 1985, 1.96%; 18 October 1985, 0.99%; 12 December 1985, 1.48%; 23 December 1985, 1.48%; 11 August 1986, 20.1% (from 603.44 to 75.53 Malagasy francs = US$1). Subsequently the exchange rate was adjusted quarterly for the change in the consumer price index for low-income households over the previous quarter. The first such adjustments were five devaluations from 5 December-end |
| August 1989
-8 May 1994 |
flexible basket | consequence of
Madagascar, banking law of May 1988, cited in World Bank (1993: 71-2) |
RR: Parallel market premium typically in low double digits. Freely falling. | The monobank system ceased, hence the exchange rate ceased to be a repressed rate. |
| 9 May 1994
-30 July 2003 |
independent float | IMF ARER (1995: 298, 301) | RR: Parallel market premium in single digits to low double digits until December 1998, when data end. Freely falling to October 1995, freely floating November 1995-December 2001, when data end. During both periods there was a parallel market with premium in double digits despite the flexibility of the official rate. | An interbank foreign exchange market began to operate, and the exchange rate was determined in that market. The French franc (which was replaced by the European euro on 1 January 1999) was the only foreign currency traded in the market. |
| 31 July 2003
-present (2005) |
Madagascar ariary, independent float | Madagascar, Law No. 2003-004, 8 July 2003, cited in Banque Centrale de Madagascar Web site, viewed 19 September 2005; IMF ARER (2004: 563) | Changed the currency unit to the ariary, at 5 Madagascar francs = 1 Madagascar ariary. During the period of the Madagascar franc, many notes and coins listed denominations both in francs and ariary. The ariary and the Madagascar franc circulated side by side as currency, with the franc continuing to be the unit used in bank accounts, until 1 January 2005, when the ariary became the only legal local unit of account (IMF ARER 2005: 573). The purpose of changing the currency unit was to assert Madagascar's national identity. See above on the 1880s about the origin of the ariary. |