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The euro is currently worth 5,000 Ariary. This situation has been going on for several weeks and has raised concerns about its impact on the country’s economy. In fact, the Ariary’s depreciation against the euro could have significant economic and social consequences for the country. Challenges related to the import of essential goods and food security could worsen, testing the resilience of Malagasy households and businesses.
A weaker ariary could make imported goods more expensive. Madagascar relies heavily on imports for basic necessities, and prices for food, medicine, and other essentials could rise. Higher import costs could lead to widespread inflation. Businesses facing higher raw material costs could pass those costs on to consumers, leading to higher prices across the economy.
To date, the Madagascar government has stabilized fuel prices through subsidies. However, currency depreciation could make these subsidies more expensive to maintain. If the government decides to reduce or eliminate these subsidies, it could lead to an immediate increase in fuel prices (using real pricing). This should have an impact, directly or indirectly, on the purchasing power of households, which risks falling, leading first to a drop in consumption and affecting local businesses.
On top of that, Madagascar is about to enter a lean period with limited food supplies. Currency depreciation could exacerbate this situation, as farmers may find it difficult to obtain imported agricultural inputs, reducing local production. As a result, rising prices for basic necessities could lead to social tensions and demonstrations, especially if households struggle to meet their basic needs.
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