A team from the International Monetary Fund (IMF), led by Mauricio Villafuerte, visited Asunción, Paraguay, from November 5 to 11, 2024. The visit aimed to discuss recent economic developments and policies in preparation for the Fourth Review of the Policy Coordination Instrument and the Second Review under the Resilience and Sustainability Facility. These reviews are expected to be considered by the IMF Executive Board by the end of this year.
Mauricio Villafuerte issued a statement at the conclusion of the visit. He noted that "Paraguay's economic activity continues to be dynamic in 2024," with GDP growth projected at around 4 percent. This growth is attributed to strong performance in domestic trade, financial services, household and business services, as well as manufacturing. However, lower electricity generation due to low water levels in the Paraná River has partially offset this positive performance.
Inflation remains close to the Central Bank of Paraguay's target of 4 percent. Villafuerte stated that "headline 12-month inflation stood at 3.6 percent in October" and is expected to remain near this target through the end of 2024.
The current account balance is expected to shift into a deficit of about 3 percent of GDP in 2024 after significant improvement in 2023. Despite expanding export volumes, a drop in soybean prices has reduced export revenue, while hydropower exports have declined due to low river levels.
Villafuerte highlighted that "the fiscal convergence plan continues to be implemented," ensuring public debt sustainability. Tax revenues have grown significantly due to robust economic activity and administrative efforts by Paraguay's National Directorate of Tax Revenue.
Reforms supported by the Policy Coordination Instrument are advancing toward inclusive and sustainable growth. Amendments have been submitted to Congress for improving private sector attractiveness under the PPP Law while managing potential fiscal risks adequately.
Under the Resilience and Sustainability Facility, Paraguay continues reforms aligned with sustainable development goals. The government plans to publish a green taxonomy following extensive consultations aimed at boosting financial resource mobilization for climate resilience initiatives.
The IMF team expressed gratitude towards Paraguayan authorities for productive discussions during their visit.