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 severe liquidity tensions that disrupt the functioning of the banking system and fuel the concerns of economic actors.
To understand the origins of this crisis and its implications, The Conversation Africa interviewed economist Amath Ndiaye. He analyzes the mechanisms that led to this situation, the vulnerabilities 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 is not the result of a simple lack of currency, but of a progressive process of imbalance. As early as the end of 2024, latent tensions appear in the banking system, under the combined effect of adecline in deposits(around 30% at the end of December 2024 over three months), an increased recourse by the State to bank financing and a growing circulation of cash outside the formal circuit.
The tipping point appears to occur in the first quarter of 2025, during which some banks probably encountered occasional difficulties in 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 evolvingprogressively towards an open crisis at the beginning of 2026, characterized by withdrawal limits and visible tensions in agencies.
Ultimately, the crisis is explained by a classic chain of events:
Liquidity breakdown → 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 vulnerabilities, but these must be properly interpreted.The low level of banking access(23%), often highlighted, is a common feature of many African economies and does not in itself constitute an anomaly.
What is decisive is the banking system’s ability to ensure its liquidity, that is to guarantee at all times the convertibility of deposits into cash. However, the structure of deposits in Guinea, dominated by demand deposits (money that can be withdrawn at any time without notice), makes the system particularly vulnerable to massive withdrawals, especially since informality remains significant.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 so, the calibration of monetary policy is questionable. At the initial stage of the crisis, between the end of 2024 and early 2025, it would have been more appropriate to increase the required reserve ratio in order to strengthen banks’ liquidity cushions, limit the pressure of public financing, and send a signal of caution.
The relaxation(lowering of its key interest rate to 9.75% and reduction of the reserve requirement ratio to 11.75%) subsequently took place but appeared late and insufficient to restore confidence. Thus, the crisis reveals both structural limits and a deficiency in the management of banking 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 withdrawal of deposits by individuals, reducing the liquidity available for the private sector.
On the monetary side, the Central Bank adopted an accommodative stance, lowering rates and reducing reserve requirements. However, these measures were taken in an already marked context of loss of confidence.
The fundamental problem is that the injected liquidityno longer circulate: 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 or confidence.
What are the consequences of this situation for banks, businesses, and households?
The consequences of this crisis are broad and affect the entire economy.
For banks, this translates into pressure on cash flow, difficulties in meeting withdrawals, and a reduction in lending capacity, which undermines their credibility.
Forthe companies, notably for SMEs, the shortage of liquidity leads to 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 resort to holding cash.
At the global level, the main risk is that of a spiral of distrust, where distrust fuels withdrawals, which in turn worsen the crisis.
What urgent measures do you recommend to restore liquidity and confidence?
Resolving the crisis requires immediate measures and a long-term strategy, drawing inspiration from international experiences of banking crises.
In the short term, it is essential to guarantee access to deposits, to secure banks’ liquidity supply, and to establish 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 state financing from excessively absorbing banking liquidity.
A central measure is required: increasing the mandatory reserve ratio. The aim here is not to restrict the economy, but to secure the liquidity of banks, strengthen their capacity to meet withdrawals, and restore the credibility of the system.
Furthermore, the decision to print fromnew cuts(banknotes) can help ease tensions on cash, provided that it takes place in a climate of trust.
Without trust, these new banknotes simply risk circulating outside the banking system, without improving effective liquidity. With trust, on the other hand, 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 above all a liquidity crisis transformed into a crisis of confidence, triggered by a breakdown 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 crisis of confidence –https://theconversation.com/guinea-a-liquidity-crisis-turned-into-a-confidence-crisis-279297