IMF concludes reviews of Paraguay's policy consultation instrument and resilience facility

IMF concludes reviews of Paraguay's policy consultation instrument and resilience facility
Economics
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Michele Shannon Director of the Office of Budget and Planning | International Monetary Fund

The International Monetary Fund (IMF) Executive Board has concluded its fourth review under the Policy Consultation Instrument (PCI) arrangement and the second review under the Resilience and Sustainability Facility (RSF) arrangement for Paraguay. The decisions were made without a formal meeting, using a lapse-of-time procedure. As a result of this review, approximately US$ 245 million (SDR 186.28 million) is now available to Paraguay under the RSF.

Paraguay's economic stability has been recognized with its first sovereign investment-grade credit rating. Economic activity remains strong, driven by consumer confidence and growth in services and manufacturing sectors. The Banco Central del Paraguay continues to maintain monetary policy based on inflation trends and expectations, while the banking system remains stable.

The Paraguayan authorities are focused on fiscal sustainability and structural reforms. Despite low risks of sovereign stress, there is an emphasis on rebuilding fiscal buffers due to recurrent shocks and infrastructure needs. Reforms aimed at increasing fiscal revenue, improving governance, reducing corruption risks, and enhancing the business climate are seen as vital for sustainable growth.

IMF staff supports completing both reviews under PCI and RSF arrangements. The authorities' commitment to macroeconomic stability and structural reform is evident in their ongoing dialogue with the IMF. Staff also backs modifications to quarterly expenditure targets for June 2025 and new reform goals related to tax compliance.

Implementing climate-related reforms under the RSF is expected to attract investments and build a resilient economy. The IMF staff endorses Paraguay's request to expedite a reform measure on recycling plastic containers. Following eight completed reforms enhancing adaptation measures, staff supports disbursing SDR 186.28 million under the RSF despite delays in electricity and transport sector reforms due to global supply chain issues.