The price of foreign currencies has continued to fall for several days, and the ariary is catching its breath. At the conclusion of the last operation yesterday, the euro stood at 4,867 ariary and the dollar at 4,548 if they were close to 5,000 ariary in January. The economist specializing in finance, Fidèle Randriamananjara explains stability in two ways. “Either the foreign exchange repatriated and declared from exports of local companies is increasing, or imports have gradually decreased, or both cases.” He puts forward a third scenario, that of the temporary non-declaration of banks and companies, associated with a drop in imports. “In this case, the stock remains unchanged, as does the demand, so the price stabilizes.”
It should be emphasized that when the price of foreign currencies increases, the situation is beneficial for commercial banks, which allows them to earn more profit, and the situation encourages them to declare more currencies and positively influences the stock. It is a game of flows, the legal deadline for declaring repatriated currencies is set by law at 30 days, with an exception of 90 days for free companies. “Certain banks and economic operators, driven by the search for profit, can keep currencies at their disposal while waiting for their price to increase, in the hope of earning more. So, generally, when the price of currencies increases, they will inject more, which will ultimately lead to stability of the ariary” adds economist Fidèle Randriamananjara. Drawing period That’s not all, once the price of the ariary stabilizes, a third actor intervenes, the exchange operators.
The latter will increase their purchase of currencies, encouraged by the relatively lower price, which could again lead to an increase in currency prices. Another explanation comes from the public sector side, “we are currently in a period of loan and grant drawings, which usually occur around the 15th of each month of the first quarter of the year, for the disbursement of the first half of the year “. Furthermore, when grace periods occur, that is to say when the payment of the principal of the debt is staggered and only the interest is paid, the situation allows the State to keep higher currencies than expected and explain a stability of the ariary, therefore more in demand compared to foreign currencies.
He is careful