When a country adopts the unit people already count in

Currency changeovers usually divide by a power of ten. The zeros come off, the arithmetic is easy, and the point of the exercise is that the numbers become shorter. Madagascar's did none of those things, and the reason is in the first sentence its central bank writes about it.

Key Takeaways

• One ariary is five Malagasy francs, a ratio inherited from the unit rather than chosen for convenience.
• The unit changed on 31 July 2003, and the definitive switch followed on 1 January 2005.
• In between, all prices had to be shown in both units.
• Banknotes carried both, in both directions: francs with ariary in small print, then ariary with francs in small print.
• The bank records the ariary as already in common use among much of the population.

What most currency changeovers are for

Shortening the numbers.

Where inflation has run for long enough, everyday prices need too many digits. A loaf costs tens of thousands, a salary runs to eight figures, and the cost is borne by everyone counting: cash registers, ledgers, mental arithmetic, and the design of the notes themselves.

The response is a redenomination. A new unit is defined as a thousand or a million of the old one, every price and balance is divided by the same factor, and nothing about anyone's wealth changes. The choice of factor is a practical one, and where the aim is to shorten the numbers it is normally a power of ten, because that is the choice that lets an old price be converted by moving a decimal point.

It is not a rule, and Australia is the nearest counterexample. The Reserve Bank of Australia records the changeover to decimal currency on 14 February 1966, known as C-Day, with the new major unit equal to ten shillings, so one pound converted to two dollars. A factor of two, chosen because the point of that reform was to decimalise the subdivisions rather than to shorten the numbers.

Set beside that, Madagascar's ratio looks like a mistake. One ariary is five Malagasy francs. Converting an old price means dividing by five, which no decimal point does.

What Banky Foiben'i Madagasikara records

Two dates, a decree, and a unit that was already in use.

The bank's own history of the currency sets out the sequence. The Malagasy monetary unit became the ariary on 31 July 2003, at one ariary to five Malagasy francs, carrying the ISO code MGA, on the occasion of the launch of what it calls the ariary fiduciaire. Fiduciary money is physical money, so that first date is the arrival of ariary notes and coins.

The second date is the one the bank calls definitive. After a transitional period during which all prices had to be expressed in both units, the definitive switch to the ariary was made on 1 January 2005, at the passage to the ariary scriptural, following the provisions of decree number 2003-781 of 8 July 2003. Scriptural money is the money in accounts, so that second date is when the banking system, contracts and the unit of account followed the notes.

Seventeen months separate the two, and for a currency in that state a cross rate quoted abroad has to pick one of the units and say which. For that whole period a Malagasy household was handling notes denominated in one unit while a good deal of the surrounding arithmetic was still done in the other, which is precisely why the display rule existed.

What the notes were doing

Carrying both units, in both directions.

This is the detail that makes the arrangement legible, and the bank records it from both sides. The banknote series issued from 2003 were denominated in ariary, but carried the counter-value in Malagasy francs written in small characters on each of the two faces. The earlier series had done the reverse: denominated in Malagasy francs, with the ariary counter-value written in small characters, in figures or in words.

So the old notes already carried the new unit before the change, and the new notes carried the old unit after it. A dual-denominated note is a translation device, and Madagascar was printing one in each direction for years either side of the switch.

That is a different design problem from the one a redenomination usually poses. Where zeros are dropped, the old note and the new note are the same amount written differently, and a reader can see it. Here the two units differ by five, so the second figure is doing real work.

Where the ratio came from

Not from the reform. The ariary was not invented for it.

The bank makes the point in a single sentence, and it reframes everything above: it should be noted that this monetary unit was in fact already commonly used by a large part of the population, particularly in rural areas.

Read against the ratio, that sentence does most of the explaining. A country designing a new unit picks a convenient factor, because the factor is the only thing it is choosing. A country adopting a unit its population already counts in is not choosing a factor at all: it inherits whatever relationship that unit already had to the official one, and here it was five. The awkward divisor is a consequence of the decision rather than part of it.

The bank does not go further than that, and neither will this guide. It does not publish an account of how the ariary came to stand at five francs, and the deeper history is not something its currency pages record.

What the same page does supply is the depth of the counting tradition the unit belongs to. Before Madagascar had a currency of its own, silver coins circulated and were physically cut into fragments to make change, with a piastre divisible into 720 parts called variraiventy, and the bank records that the practice was regulated by successive sovereigns from the reign of Andrianampoinimerina. A unit of account with roots in that system is not something a decree creates, which is the same point the reform made by adopting one rather than designing one.

What the register recorded

The second date, not the first.

The ISO 4217 historic list, maintained by SIX, carries MADAGASCAR, Malagasy Franc, MGF, numeric 450, with a withdrawal date of December 2004. That is the month before the definitive switch to the ariary as the unit of account, and more than a year after ariary notes went into circulation.

The register is tracking the unit of account rather than the notes, which is the right thing for it to track: a code is what a payment is denominated in. It is a reminder that "when did the currency change" has more than one correct answer, and that the answer a system gives depends on which of the two changes it cares about.

The reform is two decades behind and one part of it is not. The Australian dollar to ariary pair uses MGA and the franc has been gone from accounts since 2005, but a unit that entered the currency because people were already using it does not leave the same way, and prices in parts of the country are still spoken in francs. That is the reform's own logic running in reverse.

Where to look next

how to read a currency pair covers how a unit is quoted once the changeover is behind it, and what has to exist for a currency to cross a border covers what a unit needs before anybody outside the country will hold it. For the live figures, see the AUD to MGA page.

Sources

• Banky Foiben'i Madagasikara, Historique - the unit becoming the ariary on 31 July 2003 at one ariary to five Malagasy francs with the ISO code MGA, the launch of the ariary fiduciaire, the transitional period requiring all prices in both units, the definitive switch on 1 January 2005 at the passage to the ariary scriptural under decree number 2003-781 of 8 July 2003, the new notes denominated in ariary with the franc counter-value in small characters on both faces and the earlier series carrying the reverse, the note that the ariary was already commonly used by a large part of the population especially in rural areas, the Malagasy franc taking that name from 1 July 1963 under the ISO code MGF, the departure from the Franc Zone in 1972 with the franc declared inconvertible that November, the law of 22 December 1925 creating the Banque de Madagascar and the first specifically Malagasy franc, and the pre-colonial practice of cutting piastres into fragments with a piastre divisible into 720 parts
• Reserve Bank of Australia Museum, The Decimal Revolution: A New Currency - the changeover to decimal currency on 14 February 1966, known as C-Day, with the new major unit equal to ten shillings so that one pound converted to two dollars
• SIX, ISO 4217 historic denominations list, published 1 January 2026 - MGF, numeric 450, Madagascar, with a withdrawal date of December 2004

General information about currency changeovers and units of account. Not financial advice, and not a recommendation of any product or institution. Reviewed by the Tradergy editorial team, September 2026.