By Hereward Holland

KIGALI, Dec 23 (Reuters) - A senior Rwandan official being held in France over the 1994 killing of a Rwandan president will be allowed to return home on bail in January, Rwandan media reported on Tuesday.

Rose Kabuye, a close ally of current President Paul Kagame, was arrested in Germany last month on an international warrant issued by France. She is accused of involvement in the assassination of former President Juvenal Habyarimana.

His death is blamed for triggering the genocide in which over 800,000 people were killed.

"The international arrest warrant will no longer be applied, she is a free woman and she is coming home," Rwandan Justice Minister Tharcisse Karugarama told the New Times newspaper.

Neither French nor Rwandan officials were available to confirm the newspaper reports.

Kabuye is in France after extradition from Germany and her arrest has worsened already strained ties between Kigali and Paris. She has already been released on bail but not allowed to leave France without a judge's permission.

"The information I have is that her initial appearance will be on Jan. 10 next year. She will travel there on that date," said Karugarama.

"We think it is a good and right decision, after this decision, the rest will follow. We believe and hope that once the process is through, she will be proven innocent because that is what she is."

Rwanda has strongly condemned the arrest saying Kabuye was on official state business and therefore merited diplomatic immunity. Rwanda expelled the German ambassador and recalled its envoy from Berlin.

Relations with France have worsened still further.

Rwanda broke off diplomatic ties in 2006 after France issued warrants for Kabuye and other top government officials.

In August, Kigali accused 33 French political and military officials of involvement in the 100 day genocide of minority Tutsis and moderates from the Hutu majority.

The late president Habyarimana's plane was shot down over Kigali by unknown gunmen in April 1994.

France, a supporter of the Hutu-led regime that ruled Rwanda in the years leading up to the genocide, has always denied any involvement in the genocide.

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