Press Release No. 05/254

Press Release: Statement by an IMF Staff Mission to Paraguay

November 21, 2005

The following statement was released in Asunción today by Mr. Alejandro Santos, chief of an International Monetary Fund (IMF) staff mission to Paraguay:

"A mission from the International Monetary Fund (IMF) visited Asunción during November 9-21, 2005 to assess economic developments and the outlook, and ascertain the authorities' plans for a successor Fund-supported economic program. The mission was headed by Mr. Alejandro Santos and met with Finance Minister Ernst Bergen, Central Bank President Monica Perez dos Santos, Industry Minister Raul Vera and other senior officials.

"The current Stand-By Arrangement (SBA) expires on November 30, 2005, with the economic objectives for 2005 basically within reach, growth above the historical average, and substantial progress in key structural reform areas, including in meeting structural benchmarks set in the context of the sixth and final review under the SBA. However, the inflation rate has recently risen above the authorities' target, partly explained by higher oil prices and some supply shocks. The central bank is tightening monetary policy to ensure that inflation returns quickly to the target range. With this background, IMF management has recommended to our Executive Board completion of the sixth program review.

"Looking ahead, the authorities are putting together a medium-term economic policy framework and considering that it be supported by a new SBA arrangement with the Fund. We welcome the authorities' decision to develop medium-term policies that would seek to entrench economic stability, further reduce vulnerabilities in the economy, and create the conditions for sustained growth and poverty reduction.

"During this visit, we have made substantial progress in the negotiations. The authorities intend to continue discussions in the following weeks with the aim of reaching agreement shortly. Discussions have centered on the implementation of strong fiscal and monetary policies in 2006 within the context of an ambitious structural reform agenda.

"The mission would like to thank the authorities and the citizens of Paraguay for their hospitality."