- On December 18, 2024, the IMF Executive Board concluded the fourth review under the Policy Coordination Instrument (PCI) and the second review under the Resilience and Sustainability Facility (RSF) arrangement. This allows for an immediate disbursement of about US$ 245 million (SDR 186.28 million) under the RSF.
- Buoyant activity continues, reflecting high consumer confidence and expanding services and manufacturing sectors. Going forward, it would be essential to maintaining fiscal sustainability and continue with the structural reform efforts.
- Program performance under the PCI has been solid, underpinned by actions to preserve macroeconomic stability to enhance the country's economic growth prospects. Progress on the climate agenda under the RSF remains strong, bolstering Paraguay's resilience to climate shocks.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the fourth review under the PCI arrangement and the second review under the RSF arrangement. The Executive Board's decisions were taken without a meeting on a lapse-of-time basis. [1] With this review, about US$ 245 million (SDR 186.28 million) under the RSF becomes available.
Paraguay's commitment to maintain macroeconomic stability has been rewarded with the first ever sovereign investment grade credit rating. Buoyant activity continues, reflecting high consumer confidence and expanding services and manufacturing sectors. The Banco Central del Paraguay has been appropriately keeping monetary policy on hold, guided by inflation performance and expectations. Paraguay's banking system remains stable and solvent. The 2025 budget proposal is in line with the authorities' commitments on fiscal consolidation.
The authorities are keen on maintaining fiscal sustainability and continuing with the structural reform efforts. Despite a low overall risk of sovereign stress, it is essential to rebuild fiscal buffers in the face of recurrent shocks, large development and infrastructure needs, and potential contingent liabilities. In this context, reforms to boost fiscal revenue and government expenditure efficiency, improve governance and reduce corruption risks, and improve the business climate to encourage green investment should help achieve sustainable and inclusive growth.
Staff supports completion of the fourth review under the PCI and the second review under the RSF arrangement. The authorities remain dedicated to bolstering macroeconomic stability, advancing their structural reform agenda, and sustaining a close policy dialogue with the IMF under the PCI. Staff supports the authorities' request to modify the quarterly target for primary expenditure for end-June 2025 and to incorporate new reform targets on improving tax and customs compliance.
Delivering on commitments to implement a comprehensive set of climate-related reforms, including under the RSF, will open investment opportunities and help build resilient and sustainable economy. Staff supports the authorities' request under the RSF to complete the reform measure on recycling of plastic containers ahead of schedule. Based on the completion of eight reform measures to enhance adaptation and mitigation measures and to preserve and expand Paraguay's green energy matrix, staff supports the authorities' request for disbursement of 92.5 percent of quota, or SDR 186.28 million under the RSF. Delays in the implementation of reform measures on the electricity and transport sectors are justified by circumstances outside of the authorities' control (global supply chain disruptions, time needed to secure an international auditor) and prudence in completing the commitment in the context of a broad reform of public transportation.
[1] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.
