Pedro Volpe had just woken up last Tuesday when he saw a message from a friend asking whether his bank account was down, too.

It was a day after payday, and Volpe, 50, a writer and lawyer, opened his banking app and panicked: he could not even see his balance.

Volpe was among nearly 3 million Paraguayans, about 60% of the country’s adult population, whose accounts had been frozen overnight. All were customers of Ueno Bank, a digital lender that aggressively expanded across the South American country in recent years, and which, on Monday night, the central bank ordered into resolution over insolvency.

Ueno is at the centre of a political and economic crisis that has brought Paraguay’s banking system to the brink of collapse. On Friday, it led to the impeachment and house arrest of the rightwing president, Santiago Peña.

Peña had resigned the day before in a vain attempt to retain the special jurisdiction afforded to former presidents – who, under the constitution, become senators for life.…