• Guinea issues new banknotes to ease cash liquidity crunch
• 94% of notes remain outside banks, fueling shortages
• Central bank pushes digital payments, banking access reforms

The Central Bank of the Republic of Guinea (BCRG) announced on Sunday, August 31, that it is issuing a new batch of banknotes to ease a severe cash liquidity crunch affecting households and businesses.

The decision follows an urgent order placed by the central bank to meet immediate demand for physical cash. However, the BCRG clarified that while helpful, the measure is not a definitive solution. According to central bank officials, the problem isn't a lack of printed money but a fundamental issue with currency circulation. Even with new banknotes, cash will remain scarce at bank counters unless it flows back into the formal banking system.

In parallel with the new currency issue, the BCRG said it is working on a comprehensive strategy to address the root causes of the crisis. The plan focuses on several key areas: increasing banking access to encourage citizens to deposit money in banks, promoting electronic payments to reduce dependence on cash, and improving public trust in the banking system through regulatory reforms. The central bank also stressed the need for cooperation among all financial stakeholders to accelerate the digitalization of payments, with a goal of making electronic transactions more accessible and affordable for individuals and small businesses that still heavily rely on cash.

The Informal Economy's Impact

Central bank statistics reveal that about 94% of the banknotes issued in Guinea never return to banks. Instead, they are hoarded by individuals or circulate within the country's vast informal economy. This dynamic limits the amount of cash available at bank counters, even when large volumes of new bills are injected into the system. The phenomenon puts pressure on liquidity and hinders the ability of banks to finance the economy.

For example, in 2024, private sector credit in Guinea represented less than 12% of the country's GDP, which is significantly lower than the West African regional average of about 25%. The central bank emphasized that a sustainable solution requires collective responsibility. It urged citizens to deposit more cash into the banking system, businesses to gradually adopt digital solutions, and banks to rebuild customer trust.

Chamberline Moko