One of the most notable aspects of recent import trends is the sharp increase in franco valuta imports, which more than doubled from nearly $0.8 billion in 2020 to $1.8 billion now.
These imports are not financed by letters of credit from Ethiopian banks and are instead paid for by importers using whatever foreign exchange sources they have available.
Foreign investors using their own funds to finance their imports, diaspora importers with access to forex funds from income earned abroad, or local traders/companies with access to forex funds through various means are all examples of such imports.
This fiscal year, Franco valuta imports are expected to reach close to $8 billion, accounting for just over half of total non-fuel imports. In effect, more than half of Ethiopia’s imports (excluding fuel, which is imported by the government) are now financed by forex sources that are not provided by the domestic banking system and originate outside of it.
In economics, inflation occurs when an economy expands because of increased spending but not as a result of increased goods and services production. In plain language, Ethiopia’s official currency, the birr, has been devalued as a result of the current high inflation shocks. The currency would be unable to purchase as much as it once could.
Source: CEPHEUS
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