An International Monetary Fund (IMF) team, led by Fabian Valencia, visited Asunción, Paraguay from October 27 to November 5, 2025. The purpose of the visit was to discuss recent economic developments and policy implementation with Paraguayan authorities as part of the Sixth Review under the Policy Coordination Instrument (PCI) and Fourth Review under the Resilience and Sustainability Facility (RSF). These are the final reviews for both arrangements that began in 2022 and 2023.
At the end of the mission, Mr. Valencia stated: “The Paraguayan authorities and the IMF team held productive discussions on policies and reforms to complete the Sixth Review under the Policy Coordination Instrument (PCI) and Fourth Review under the Resilience and Sustainability Facility (RSF), the final reviews for both arrangements which commenced in 2022 and 2023, respectively. The IMF’s Executive Board is expected to consider the reviews in January 2026. An approval would make up to SDR 130.92 million or about US$ 178 million available for disbursement.”
He continued: "Paraguay’s economic performance has remained strong amid heightened global uncertainty. Real GDP expanded 5.9 percent year on year in the first half of 2025, driven by robust performance in services, electricity, manufacturing, and construction. From the demand side, strong private consumption and gross fixed capital formation underpinned the economic expansion. Real GDP growth is expected to be 5.3 percent in 2025 and to continue showing dynamism in 2026, with domestic demand remaining an important driver of growth.”
Mr. Valencia emphasized a data-driven approach for monetary policy: “Monetary policy should remain data driven. The headline 12-month inflation rate stood at 4.1 percent in October, owing mainly to some food price pressures. After peaking earlier in the year, measures of core inflation are easing, supported by the appreciation of the guarani against the U.S. dollar. Headline inflation is projected at 4 percent by end-2025 and to reach the central bank’s target of 3.5 percent in 2026. Inflation expectations at the monetary policy horizon remain well-anchored around the central bank’s new target of 3.5 percent, set in end-2024.”
On external balances he said: “The current account balance is expected to deteriorate somewhat this year as the strong growth in consumption- and investment-related imports has outpaced export growth—although rising beef exports are helping to cushion the impact of lower soy prices.”
Regarding fiscal matters he added: “Completing the fiscal consolidation plan of reducing the fiscal deficit to 1.9 percent of GDP this year and 1.5 percent of GDP in 2026 is critical to preserve macroeconomic stability and to put the public debt-to-GDP ratio on a downward trajectory over the medium term. With a cumulative deficit of 0.9 percent of GDP through September, the deficit target for this year is within reach. The 2026 draft budget law, currently in Congress, envisages a fiscal deficit of 1.5 percent of GDP, which would restore compliance with the deficit ceiling stipulated in the Fiscal Responsibility Law for the first time since 2018. Addressing sustainability of public pension system (Caja Fiscal) through parametric reforms remains critical to contain medium- to long-term fiscal risks and free up budget space to meet long-term development needs.”
He also addressed structural reforms: “Maintaining structural reform momentum will further strengthen macroeconomic stability and foster sustainable and inclusive growth. Paraguay continues to make progress on structural reforms supported by PCI… Key reforms under current review include National Directorate of Tax Revenue (DNIT)’s work on institutionalizing compliance risk management by establishing a Risk Committee…to reduce duplicate invoicing and mitigate undervaluation… Authorities are strengthening framework for monitoring public investment projects…”
In terms of resilience measures he noted: “Paraguay also continues progress on reforms under RSF…aimed at strengthening resilience against natural disasters… Preservation/expansion Paraguay’s renewable electricity matrix supported by several reform measures… National Electricity Company (ANDE)…underwent cost efficiency analysis…and external audit…will strengthen analysis new transparent methodologies set electricity tariffs ensure operating/investment costs adequately/sustainably reflected... Reforms that aim contain fuel/petroleum product imports also supported by RSF.”
The IMF team expressed gratitude towards Paraguayan authorities for their cooperation during discussions.