The Rwandan franc depreciated by 9.68 percent in the 2024/2025 financial year against the US dollar, a marked improvement from the 12.59 percent recorded the previous year, according to the central bank.

The National Bank of Rwanda attributed the moderation in depreciation to an improved trade deficit, domestic foreign exchange market reforms aimed at curbing malpractices, and a broader weakening of the US dollar in global markets.

During the review period, however, the local currency weakened more sharply against several other major currencies — falling by 22.55 percent against the Japanese yen, 20.26 percent against the euro, 19.17 percent against the pound sterling and 11.26 percent against the renminbi.“This trend was primarily driven by the strengthening of these currencies against the US dollar, prompted by a decline in global investor confidence in US assets after the announcement of new tariffs,” the central bank says in its annual report.

Regionally, the franc depreciated by 6.05 percent against the Burundian franc, slower than the 10.52 percent recorded in the previous fiscal year. Against the Tanzanian shilling, it fell by 9.25 percent compared to 3.61 percent a year earlier.

“The relative resilience of Ugandan shilling was supported by strong remittance inflows, NGO receipts, offshore investments, and robust coffee export earnings,” the central bank said.

Depreciation against the Kenyan shilling eased to 9.68 percent from 22.43 percent in the prior year.

The value of the franc against a basket of currencies from 31 trading partners — measured by the nominal effective exchange rate (NEER) — fell by 11.9 percent as of June 2025, compared to 8.8 percent in June 2024.

In real terms, the real effective exchange rate (REER) depreciated by 8.2 percent in June 2025, from 9.2 percent in June 2024. This was attributed to higher nominal depreciation and positive inflation differentials, reflecting higher domestic inflation compared to Rwanda’s main trading partners.

The franc has faced sustained depreciation over the past year due to a persistent mismatch between foreign currency demand and supply, driven by strong import needs, a widening trade deficit and increased demand for foreign exchange to pay for fuel, machinery and other goods.

A sharp drop in foreign aid — particularly from the US — has also reduced foreign currency inflows. Aid cuts have been linked to allegations of Rwanda’s involvement in the conflict in eastern Congo between government forces and M23 rebels, a claim Kigali has consistently rejected.

Rwanda’s trade imbalance is structural, stemming from a long-standing trade deficit driven by high demand for imported manufactured goods, capital goods for infrastructure and food products.

Although the deficit remains large, it has shown signs of narrowing in recent quarters due to lower global commodity prices, reduced imports and softer export volumes, though volatility persists.

Analysts say the slower depreciation reflects stronger export performance, tighter monetary policy and fewer external shocks compared to 2024.

Improved earnings from coffee, tea and minerals helped narrow the trade deficit and boost foreign currency inflows, easing pressure on the franc.

“Last year’s sharper depreciation was driven by severe imbalances in the foreign exchange market, worsened by dollarisation and speculation. In 2025, those imbalances were less pronounced thanks to stronger regulation and targeted interventions,” said economist Angello Musinguzi.

The central bank also acted as a liquidity provider of last resort, ensuring banks had access to foreign currency and preventing panic shortages.

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