IMF Mission Concludes Visit to Paraguay for the Sixth Review under the Policy Coordination Instrument and Fourth Review under the Resilience and Sustainability Facility

IMF Mission Concludes Visit to Paraguay for the Sixth Review under the Policy Coordination Instrument and Fourth Review under the Resilience and Sustainability Facility

November 6, 2025

• IMF staff and the Paraguayan authorities discussed policies and reform progress to complete the Sixth Review under the Policy Coordination Instrument (PCI) and Fourth Review under the Resilience and Sustainability Facility (RSF), the final reviews under both arrangements.
• Paraguay's economy performance remains strong and the authorities continue to make solid progress with reforms under the PCI and RSF, while advancing on fiscal consolidation and keeping inflation within the central banks' tolerance range. Foreign reserve buffers remain above adequate levels.
• Continuing to pursue prudent macroeconomic policies, including by completing the fiscal convergence plan, and sustaining structural reform efforts is paramount to further strengthen macroeconomic stability and to enhance Paraguay's prospects for sustainable and inclusive growth in the long-term.

Washington, DC: An International Monetary Fund (IMF) team led by Fabian Valencia visited Asunción, Paraguay from October 27 to November 5, 2025, to discuss recent economic developments and policy implementation. At the conclusion of the visit, Mr. Valencia issued the following statement:

"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."

"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."

"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."

"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."

"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 the sustainability of the 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."

"Maintaining the structural reform momentum will further strengthen macroeconomic stability and foster sustainable and inclusive growth. Paraguay continues to make progress on structural reforms supported by the PCI, which aim at promoting a more efficient public sector, increasing private investment, and promoting inclusive growth. Key reforms under the current review include the National Directorate of Tax Revenue (DNIT)'s work on institutionalizing compliance risk management by establishing a Risk Committee and developing and implementing compliance improvement plans to reduce duplicate invoicing and mitigate the undervaluation of imported goods. These are key risks to domestic and customs tax collection. Further, the authorities are strengthening the framework for monitoring and assessing public investment projects and began its implementation with a set of pilot projects."

"Paraguay also continues to make progress on reforms under the RSF, which aim to strengthen the resilience to natural disasters and reduce medium- to long-term balance of payments risks. The preservation and expansion of Paraguay's renewable electricity matrix is one area supported by several reform measures under the RSF. The National Electricity Company (ANDE), whose financial sustainability is critical for these efforts, underwent a cost efficiency analysis by an independent consultancy and an external audit of its financial statements, which along with the electricity loss reduction strategy published last year, will strengthen the analysis of new transparent methodologies to set electricity tariffs and ensure that operating and investment costs are adequately and sustainably reflected. Reforms that aim to contain fuel and petroleum product imports in the medium term are also supported by the RSF."

The IMF team extends its gratitude to the Paraguayan authorities and other counterparts for the productive discussions."