Source: French to English Tester Published on: 2026-03-30
Source: The Conversation – in French– By Amath Ndiaye, teacher-researcher, Cheikh Anta Diop University of Dakar
Sincenine months, Guinea is facing strong liquidity tensions that disrupt the functioning of the banking system and fuel the concern of economic actors.
To understand the origins of this crisis and its implications, The Conversation Africa interviewed the economist Amath Ndiaye. He analyzes the mechanisms that led to this situation, the weaknesses it reveals, and the measures likely to restore liquidity and confidence in the Guinean financial system..
What are the main causes of the ongoing liquidity crisis in Guinea?
The current crisis does not result from a mere lack of currency, but from a gradual process of imbalance. As early as the end of 2024, latent tensions appear in the banking system, under the combined effect of adecrease in deposits(about 30% at the end of December 2024 over three months), increased use by the State of bank financing and a growing circulation of cash outside the formal circuit.
The tipping point seems to occur in the first quarter of 2025, a period during which some banks probably encountered occasional difficulties meeting withdrawal requests. This initial liquidity break, even if limited, was enough to trigger public distrust.
From there, a self-sustaining dynamic sets in: economic agents, anticipating difficulties in accessing their funds, withdraw more liquidity and keep it outside the banking system.This situation is evolvinggradually towards an open crisis in early 2026, characterized by withdrawal limits and visible tensions in the branches.
Ultimately, the crisis can be explained by a classic sequence:
Liquidity break → Loss of confidence → Massive withdrawals → Worsening of the crisis.
Does this crisis reveal structural weaknesses in the Guinean financial system?
The crisis indeed highlights structural weaknesses, but these must be correctly interpreted.Low bank penetration(23%), often highlighted, is a common characteristic of many African economies and does not constitute an anomaly in itself.
What is crucial is the banking system’s ability to ensure its liquidity, that is, to guarantee at any time the convertibility of deposits into cash. Now, the structure of deposits in Guinea, dominated by demand deposits (money that can be withdrawn at any time without notice), makes the system particularly vulnerable to massive withdrawals, especially since informality remains significant.
Beyond these factors, the crisis also reveals an institutional fragility. TheCentral Bank of Guineaseems not to have fully anticipated the rise in tensions. Even more, the calibration of monetary policy is questionable. At the initial stage of the crisis, between the end of 2024 and the beginning of 2025, it would have been more appropriate to increase the required reserve ratio in order to strengthen banks’ liquidity buffers, limit the pressure of public financing, and send a signal of caution.
The easing(lowering its key interest rate to 9.75% and reducing the reserve requirement ratio to 11.75%) which came later appeared belated and insufficient to restore confidence. Thus, the crisis reveals both structural limits and inadequacy in the management of bank liquidity.
What role have fiscal and monetary policies played in these tensions?
Economic policies played a decisive role in the emergence and amplification of the crisis.
On the budgetary side, the State has increased its reliance on domestic financing, heavily mobilizing the resources of the banking system. This situation has caused a crowding-out effect due to deposit withdrawals by individuals, reducing the liquidity available for the private sector.
On the monetary side, the Central Bank adopted an accommodative stance by lowering rates and reducing reserve requirements. However, these measures took place in a context already marked by a loss of confidence.
The fundamental problem is that the injected liquidityno longer circulates: it is hoarded outside the banking system. Thus, despite the efforts of the Central Bank, tensions persist.
Overall, fiscal policy contributed to absorbing liquidity, while monetary policy failed to restore circulation and confidence.
What are the consequences of this situation for banks, businesses, and households?
The consequences of this crisis are wide-ranging and affect the entire economy.
For banks, it results in pressure on cash flow, difficulties in meeting withdrawals, and a reduction in lending capacity, which undermines their credibility.
Forbusinesses, notably for SMEs, the liquidity shortage causes payment delays, supply difficulties, and a slowdown in activity.
For households, the crisis manifests itself through limited access to their deposits, a decrease in consumption, and an increased reliance on holding cash.
At the global level, the main risk is that of a spiral of mistrust, where mistrust fuels withdrawals, which in turn worsen the crisis.
What urgent measures do you recommend to restore liquidity and confidence?
The crisis exit requires immediate measures and a fundamental strategy, drawing inspiration from international experiences of banking crises.
In the short term, it is essential to guarantee access to deposits, secure the liquidity supply of banks, and implement targeted refinancing facilities. Clear and credible communication from the authorities is also indispensable to restore confidence.
Coordination between fiscal and monetary policy must be strengthened in order to prevent government financing from excessively absorbing banking liquidity.
A central measure is imperative: the increase of the required reserve ratio. This is not about restricting the economy, but about securing the liquidity of banks, strengthening their capacity to meet withdrawals, and restoring the credibility of the system.
Furthermore, the decision to print ofnew cuts(banknotes) can help ease tensions on cash, provided it takes place in a climate of trust.
Without trust, these new notes are simply likely to circulate outside the banking system, without improving actual liquidity. With trust, on the contrary, they can revive monetary circulation.
In the medium term, the reforms must focus on strengthening liquidity monitoring, improving the calibration of monetary instruments, developing digital payments, and mobilizing more stable deposits.
Ultimately, the Guinean crisis is primarily a liquidity crisis turned into a confidence crisis, triggered by a rupture at the beginning of 2025. It recalls a fundamental lesson of monetary economics: it is not the quantity of money that guarantees stability, but its circulation and the confidence it inspires.
Amath Ndiaye does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
–ref. Guinea: a liquidity crisis turned into a confidence crisis –https://theconversation.com/guinea-a-liquidity-crisis-turned-into-a-confidence-crisis-279297