Rwanda's economy registered a big drop in inflation, with the rates falling to 4.8 percent in 2024, down from 14.0 percent recorded in 2023. Central Bank Governor, Soraya Hakuziyaremye, on Wednesday, March 19, attributed the decline to strong domestic agricultural performance, the easing of key international commodity prices, and the central bank’s tight monetary policies. ALSO READ: Central bank downplays inflation fears over new tax reforms While presenting the Monetary Policy and Financial Stability Statement, on Wednesday, she said: “Additionally, government interventions aimed at reducing the cost of essential goods played a crucial role in reducing inflation rates.” ALSO READ: Can Rwanda's monetary policy shift stimulate growth? The decline in inflation reflects improved economic stability and increased purchasing power for consumers., according to experts. Lower inflation often translates to reduced costs for businesses, encouraging investment and economic growth. Households benefit from stabilized prices, leading to an increase in disposable income and overall economic confidence. ALSO READ: Soraya Hakuziyaremye discusses plan to strengthen Rwanda's financial stability However, Hakuziyaremye pointed out that Rwanda experienced a temporary rise in inflation at the beginning of 2025, with rates reaching 7.4 percent in January. “This increase was mainly attributed to the base effect following the strong agricultural harvest in the fourth quarter of 2024. Despite this uptick, inflation had already moderated to 6.3 percent by February 2025.” Hakuziyaremye expressed optimism for the inflation rates to remain within the target range. She said that current data projects inflation rates to evolve around 6.5 percent in 2025 and 4.1 percent by 2026. “While this outlook is positive, there remain risks that need close monitoring including escalating regional and global tensions which pose potential threats to economic stability, while adverse weather conditions could impact agricultural productivity.” In Sub-Saharan Africa, inflation rates are still at a double-digit level, with current projections at 12.3 percent for the year 2025. The purpose of the Monetary Policy and Financial Stability Statement (MPFSS) of March 2025 is to evaluate the economic and financial developments of 2024 and to provide an outlook for 2025 and beyond. This statement begins by outlining global economic trends to provide context for the domestic economic and financial performance and stability, before concluding with the outlook. According to Hakuziyaremye, Rwanda’s financial sector is expected to remain stable in the short and medium term, even as she warned of vulnerabilities related to increasing credit risk. “Rwanda’s financial sector continues to be stable, but we continue to closely monitor existing and emerging risks to make sure that financial institutions maintain adequate liquidity buffers, capital, but also sound risk management practices.” “As we continue to navigate an uncertain global context, commodity prices are declining overall, in 2024, the global energy index declined by 2.7 percent and we expect a larger decline at about 6.3 percent, mainly due to the falling prices of crude oil, but also lower demand globally.” Financial sector to remain stable According to current high-frequency indicators, Hakuziyaremye said that Rwanda’s economy is likely to grow above the 8.3 percent projected earlier. ALSO READ: Rwanda’s economy will grow higher than earlier projected - Rwangombwa| This, she maintained, is largely attributed to the performance of the industry sector, mining and quarry, construction, among others, as well as the services sector. Both sectors grew by double digits in 2024. In the external sector, she pointed out that there was good momentum, particularly in the exports which grew by 6.9 percent compared to the moderate growth in 2023. “This is primarily driven by the increase in prices of traditional exports meaning minerals and coffee, but also the sustained regional demand for not only manufactured products but also re-exports.” “At the same time, we saw imports increasing but at a lower rate than 2023, and this 5.8 percent growth in imports was largely due to higher demands for capital goods, including IT equipment, hybrid cars, raw materials, and intermediary goods.” In 2024, the Central Bank reduced its lending rates twice to 6.5 percent, a move that Hakuziyaremye says has also slightly allowed for the decrease in interbank rates from 7.8 percent to 7.6 percent. “We are noticing a lagging effect on the lending rate but when we look at large corporate loans they are reducing but the personal rates which tend to be short term have higher interest rates which drive higher the average lending rate.”
