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Franco Valuta L/C, CAD, TT - Th...

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#Ethiopia In an unstable economy, franco valutas have the negative effect of increasing the demand for illicit foreign exchange, thereby increasing the value of the currency, thereby driving down the value of the supply. 

Franco Valuta L/C, CAD, TT... It means importing products and materials permitted by law using "own" foreign currency supply without using the same bank-to-bank procedures and banks' foreign currency supply. 

Franco Valuta is an import license used as a short-term breather for countries experiencing severe foreign exchange shortages and high inflation. 

Some countries only allow the supply of foreign currency to importers whose source is known, in order to prevent the demand for franco currency from expanding the black market and distorting the exchange rate. 

Although it is said that franco valuta has the advantage of supporting the shortage of foreign currency and increasing supply, in countries where the purchasing power of money is hit by high inflation, importing goods using one's own foreign currency is replaced by the money exchanged every day.  

This is expected to increase the demand of the black market, expand the circulation of foreign currency and have a significant impact on the supply and price of foreign currency.  

Franco Valuta has the negative effect of increasing the demand for illicit foreign exchange in an unstable economy and driving up the FX Exchange Rate. 

On the other hand, by narrowing the gap between supply and demand in the short term, the inflation caused by exchange rate appreciation can mitigate the artificial inflation caused by the shortage of supply.