Lowering consumption: ways for young people to cope with the current inflation in Rwanda

Rwanda’s young people, who account for 71% of the country’s population, must learn how to deal with rising prices.

Life does not stop during inflation; only lifestyles do. Because the youth are the most affected by this situation, they must become accustomed to it.

Despite that fact, there are some young people who continue to live their lives as usual, spending money as they would normally do, and this can have an impact on them in some way.

Urban market prices had risen by 20.1% by October 2022, while food and non-perishable drink prices had risen by 39.7%.

According to statistics, Rwanda’s prices will rise 13.2% on average this year.

To give you some context, something that cost 100 Frw last year will cost more than 113 Frw this year, though some will have increased significantly, possibly even doubled, while others may not have increased at all.

This increase in prices has exceeded the Central Bank’s inflation benchmark of 5% in Rwanda, as well as the 8% limit considered to be the highest tolerable inflation benchmark.

This is a situation that disproportionately affects young people, who are often unemployed or have low income.

In a discussion with Prof. Kasai Ndahiriwe, Director Monetary Policy Department at the Central Bank of Rwanda, BNR, he stated that in such situations, young people should reduce their consumption and increase their investments.

“First, money spent on non-essentials should be reduced,” he said. Although this should be standard procedure, it is critical in these times to limit spending to necessities.”

A person should limit their purchases of new clothes, unnecessary food or beverages, and other non-essential daily necessities.

That goes hand in hand with saving money on travel by visiting friends or relatives who are in the same location on the same day rather than going there at different times. According to some, it is “killing two birds with one stone.”

“You do everything at the same time,” Prof. Ndahiriwe continued, “which is great planning that you can also do when the situation is not as critical.”

As the holidays approach, he advises young people to refrain from spending their hard-earned money on things they do not require.

“You might want to change your phone if it’s something you need for work, for example, that can be considered an investment,” he said.

“But if you don’t necessarily need it and have one you can use, you can tell yourself ‘these are not the times to spend money,’ unless you see it as important, in which case you have to be careful and strategic, and you can tell yourself ‘I will do this today and that another time,”

The problems with this sharp increase in prices are primarily due to the effects of the war between Russia and Ukraine – countries that are extremely rich in oil, gas, raw materials, minerals, and grains – which has made many products scarce on the market, causing their prices to rise.

It has also increased the cost of the global supply chain due to increased transportation costs. The situation was exacerbated in recent months by poor agricultural production caused by climate change.

The Central Bank of Rwanda, BNR, has recently taken steps to limit the amount of money people can withdraw from their bank accounts in order to reduce overspending.

This is a measure that is usually implemented during times of inflation to slow the rate at which it rises.

“This discourages those who raise their prices because a limited number of people are buying their products,” said John Rwangomba, Governor of the Central Bank of Rwanda. “It also slows the rate of inflation, which is what the Central Bank wants.”