Central Bank Governor Soraya M. Hakuziyaremye and her team at announcement of the findings of the Monetary Stability Committee in July last year
Rwanda is pursuing a carefully calibrated monetary strategy—one that tightens the cost of government borrowing while easing credit conditions for businesses—as policymakers seek to curb inflation without undermining economic growth.
According to the latest EAC Quarterly Statistics Bulletin released January 28 for the final quarter of last year, Rwanda was the only country in the East African Community region where the yield on the 91-day Treasury Bill rose in the third quarter of 2025, increasing by 90 basis points.
Treasury Bills are a key benchmark for short-term government borrowing, and higher yields signal a deliberate move to make public borrowing more expensive.
At the same time, lending rates charged by commercial banks declined by 30 basis points, indicating a modest easing of credit conditions for the private sector.
The divergence is striking—and appears intentional.
A Targeted Form of Tightening
In most economies, tighter monetary conditions tend to push up borrowing costs across the board. Rwanda’s approach departs from that pattern. By allowing Treasury Bill rates to rise while encouraging a slight reduction in lending rates, policymakers appear to be drawing a clear distinction between public and private borrowing.
The signal is twofold: rein in government demand for short-term financing, while sustaining investment, production, and job creation in the private sector.
When government can freely borrow, many lenders would prefer to give their money to the state because they know the returns are obvious and predictable. As a result, there is little left for you and me to borrow to expand our small businesses.
This balancing act comes as inflation in Rwanda hovers near the East African Monetary Union’s convergence ceiling of 8 percent. While inflation has shown signs of easing, it remains high enough to limit room for aggressive monetary loosening.
Managing Inflation Without Stalling Growth
Higher Treasury Bill rates serve as a brake on liquidity, helping to absorb excess money in the financial system and temper inflationary pressures. At the same time, lower lending rates—though modest in scale—suggest an effort to ensure that businesses are not crowded out by government borrowing or discouraged from expanding due to prohibitively high credit costs.
Economists often warn that excessive government borrowing can push up interest rates and crowd out private investment. Rwanda’s policy mix appears designed to avoid that outcome, even as fiscal and inflationary constraints tighten.
Not Cheap Credit—But a Clear Direction
The easing of lending rates does not mean that credit in Rwanda is cheap by regional or global standards. Nor does it guarantee easier access to loans for all businesses. What it reflects instead is a directional choice: to prioritize productive private-sector activity over short-term public financing.
In a regional context where many economies face rising debt burdens and persistent inflation, Rwanda’s approach stands out for its precision rather than its scale. The adjustments are small, but the policy message is clear.
A Delicate Balancing Act Ahead
Whether the strategy succeeds will depend on how inflation evolves and how banks respond beyond headline rates. If inflation accelerates, pressure may mount to tighten credit more broadly. If growth weakens, the central bank may face calls to ease further.
For now, Rwanda appears to be walking a narrow path—tightening where restraint is needed, easing where growth is most fragile. It is a reminder that in today’s economic climate, monetary policy is less about dramatic shifts and more about fine tuning.
