## 1. Boosting Potential Growth ## Source details **Canonical URL:** [1. Boosting Potential Growth](https://www.imf.org/-/media/files/publications/cr/2026/english/1perea2026001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1perea2026001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1perea2026001.pdf.json) --- ### Macroeconomic context and recent performance - Real GDP expanded 3.4 percent in 2025, bringing economic activity close to potential. - Private investment grew 10 percent in 2025—its strongest pace since 2013 excluding the post-pandemic rebound. - Unemployment declined to 5.0 percent in December 2025 (from 5.5 percent in 2024). - Adequate employment rate: 62.5 percent in December 2025; real wage growth averaged 1.8 percent in 2025. - Business and consumer confidence reached their highest levels since 2020. - Political instability increased, culminating in the impeachment of President Boluarte in October 2025 and President Jerí in February 2026, creating high uncertainty ahead of April 2026 general elections. - Labor force participation remains below pre-pandemic levels and informality remains very high. ### Monetary and inflation developments - Headline, core, and 12‑month ahead inflation expectations were within the 1–3 percent target band throughout 2025: 1.5 percent (headline), 1.8 percent (core), and 2.1 percent (expectations) in December 2025. - BCRP policy rate reduced by 75 bps in 2025 to 4.25 percent. - Early 2026 shocks: - Intense rainfall disrupted agricultural supply chains in February 2026. - Explosion in the Camisea natural gas pipeline in March 2026 collapsed gas supply for 2 weeks and increased domestic energy prices. - Headline and core inflation rose to 3.8 percent and 3.6 percent, respectively, in March 2026. ### Fiscal developments and public debt - NFPS deficit: fell from 3.5 percent of GDP in 2024 to 2.2 percent in 2025—the fiscal rule target. - Structural deficit: 3.6 percent of potential GDP in 2025 prices (MEF, 2026). - Consolidation drivers: - About one third from higher tax revenue (bolstered by higher TOT and expected rebound in tax collections including CIT and regularizations). - Additional gains from a tax amnesty, capital gains taxes on large corporate asset sales, and tax assessments. - General government expenditure dropped in GDP terms; moderation in wages and goods and services, restrained public investment, and lower financial support to Petroperú. - Gross public debt: fell from 32.1 to 30.2 percent of GDP in 2025. - Total public assets: declined from 8.6 percent of GDP in 2024 to 7.4 percent in 2025. - Emergency Decree 8/2025 measures expired at end-2025. ### External sector and buffers - Current account surplus: 3.1 percent of GDP in 2025. - Real effective exchange rate: appreciated by 4 percent in 2025. - International reserves: US$90.3 billion at end-2025 (27 percent of GDP and 268 percent of the ARA metric). - External position in 2025 stronger than levels implied by fundamentals and desirable policies, driven by strong private savings and subdued investment despite 2025 investment recovery. ### Financial sector and credit - Banking system soundness: - Total capital ratio: 17.9 percent by end-2025. - LCR: 166.9 percent by end-2025. - NPL ratio: 3.5 percent by end-2025 (peak 4.6 percent in March 2024). - Credit-to-GDP gap: -3.5 percentage points in 2025Q4 (recovering slightly from –3.6 pp in 2025Q1). - Long-term sovereign yields: 5.9 percent in 2025Q4 (from 6.6 percent a year earlier). - Stock prices: rose 98 percent between start of 2025 and peak at end-February 2026, then fell 13 percent in March 2026. ### Outlook, projections, and risks - Baseline projection (limited spillovers from a short-lived Middle East war): - Growth: 2.8 percent in 2026. - Potential growth: marginally improves to 2.8 percent owing to favorable metal prices (Box 1). - Inflation: headline and core expected to temporarily exceed the 1–3 percent band before decelerating to 2.5 percent toward end-2026. - Current account: projected surplus of 3.4 percent of GDP in 2026, gradually shifting to a deficit and stabilizing around a deficit of about 0.8 percent of GDP as TOT normalize and private investment grows. - Fiscal outlook: under current policies fiscal deficit narrows but remains above rule in medium term; public debt stabilizes around 32 percent of GDP—above the 30 percent of GDP legal limit by 2035. - Balance of risks: tilted to the downside (domestic: political uncertainty, social unrest, weather shocks, insecurity, illegal mining; external: protracted Middle East conflict, upside inflation risks, regional tensions, protectionism, trade disruptions, disorderly AI correction). - Upside scenario: higher-than-expected growth if high metal prices spur stronger private investment or post-election political stability enables structural reforms. ### Box 1 — Role of metal prices and potential growth - Minerals account for about 66 percent of Peru’s exports; copper and gold comprised 45 and 38 percent of mineral exports in 2025, respectively. - A US$64 billion pipeline of mining projects could raise potential growth by 0.5-1 pp, but many projects are stalled due to bureaucratic complexity, social conflicts, illegal mining, and illicit financial flows. - Since 2012, negative productivity growth and low private investment led to declining potential growth. - Growth-enhancing reforms and prudent macroeconomic management in the 2000s supported higher-than-predicted growth given strong TOT (inflation targeting, fiscal rules, trade and financial liberalization, infrastructure improvements, and reforms in healthcare, education, civil service, pensions, and taxes). ### Impact of a prolonged global energy shock (scenario) - Scenario assumption: oil prices approximately double in 2026 and in 2027 compared to the baseline assumption. - Baseline average petroleum spot prices: US$82 and US$76 per barrel in the baseline scenario for 2026 and 2027, respectively. - Real economy impact: - Growth: lower by about 1-1.5 pp in both years. - Inflation: could increase by up to 1.5 pp, bringing headline CPI above the target band. - Macroeconomic balances would weaken, though high metal prices would still support terms of trade. - Growth impact could be partially offset by export boost from currency depreciation due to tighter global financial conditions. - Policy responses: tighter monetary policy to prevent second-round effects; possibly targeted fiscal offsets if automatic stabilizers insufficient. - Domestic resilience: strong buffers—low public debt, abundant international reserves, access to international capital markets. - Note: scenario focuses on oil price impacts; local natural gas production limits international price pass-through to domestic gas prices. ### Reigniting a reform momentum — opportunity and priorities - Use favorable TOT to undertake ambitious reforms. - Key priorities and benefits: - Implement a credible fiscal consolidation plan to create space for critical social and infrastructure spending within the fiscal rule. - Address illegal mining and security challenges and structural barriers to investment to rebalance external position and raise potential growth. - Continue monitoring financial system risks and close regulatory gaps. ### A. Addressing structural fiscal challenges — findings and recommendations - Fiscal path and risks: - 2026 Budget and authorities’ medium-term framework project an appropriate fiscal path but rely on unidentified measures. - 2026 Budget foresees an increase in current spending share (mostly wages) and assignments to regional and local governments, at the expense of public investment. - Authorities’ 2026-2029 framework plans to meet the 2026 fiscal deficit target of 1.8 percent of GDP through current and capital spending restraint; medium-term revenues would remain stable while interest payments increase marginally. - Fiscal gap and consolidation needs: - Without additional measures, fiscal deficit would miss fiscal rule by 0.2 percent of GDP in 2026 and 0.9 percent of GDP in 2028. - Consolidation of at least 0.9 percent of GDP to meet 2028 target could be obtained by: - i) slowing trends in public employment and public spending at subnational levels; - ii) improving procurement practices; - iii) adopting PFM measures to improve public investment efficiency. - Ongoing Petroperú reforms could reduce costs and support fiscal objectives. - Any fiscal support in response to shocks should be targeted to the most vulnerable, feature clear sunset clauses, and avoid distorting hydrocarbon prices. - Revenue-side and structural reforms: - Closing infrastructure gaps over 2019-2030 could require resources equivalent to almost 50 percent of 2019 GDP (IDB, 2021). - Priorities: reduce informality (especially in critical mineral sector); remove inefficient tax expenditures (agro-exporters, SEZs); homogenize tax treatment on capital and labor income; review excise taxation; facilitate tax compliance via digitalization and rationalization of MSME regimes. - Tax policy options: raising the PIT exemption threshold; enhancing progressivity of mining tax regime. - Modernize SUNAT to reduce VAT and CIT non-compliance through dedicated Compliance Improvement Plans. - Acuerdo Fiscal is a welcome initiative to facilitate public debate on fiscal sustainability and tax base expansion. - Fiscal numbers and projections (selected reported series): - Revenues (GG): 19.1 19.2 19.4 0.2 19.2 19.3 0.1 19.2 19.3 0.1 19.2 19.3 0.2 - Taxes: 14.8 15.0 15.1 0.2 15.0 15.1 0.1 15.0 15.0 0.0 15.0 15.1 0.1 - Primary Expenditure (GG): 20.0 19.3 19.8 0.5 18.9 19.7 0.8 18.5 19.5 1.0 18.5 19.4 0.9 - Current: 14.3 14.0 14.4 0.4 13.7 14.2 0.5 13.3 14.0 0.7 13.2 13.9 0.7 - Capital: 5.6 5.3 5.4 0.1 5.2 5.4 0.2 5.2 5.5 0.3 5.4 5.6 0.2 - Primary Balance (GG): -0.9 -0.1 -0.4 -0.3 0.3 -0.4 -0.6 0.7 -0.3 -0.9 0.6 -0.1 -0.7 - Interest: 1.6 1.7 1.7 0.0 1.8 1.7 -0.1 1.8 1.7 -0.1 1.7 1.7 0.0 - SOEs Net Operating Balance: 0.3 0.1 0.1 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.1 0.0 -0.1 - Overall Balance (NFPS): -2.2 -1.8 -2.0 -0.2 -1.4 -2.0 -0.6 -1.0 -1.9 -0.9 -1.0 -1.8 -0.8 - Potential savings from spending measures (2028, percent of GDP, as presented): - NFPS deficit: Baseline 1.9 -> Recommended 1.0 - GG Current spending: Baseline 14.0 -> Recommended 13.3 - Suggested savings: Wage control 0.3; Transfer decompression 0.2; Procurement improvements 0.1 - GG Capital spending: Baseline 5.5 -> Recommended 5.2 - Suggested savings: FONCOMUN reform savings 0.2; Efficiency improvements 0.1 - Gap with fiscal rule: 0.9 -> 0.0 ### Public investment, PPPs, and contingent liabilities - Over 2024-2025, about 20 PPP projects awarded and more than 600 works-for-taxes (OxI), equivalent to yearly averages of US$3.7 billion and US$1.3 billion, respectively. - Two laws in 2025 reorganized PPP framework and expanded OxI; legal limit for subnational governments to award OxI raised to about 6 percent of GDP in 2025. - Net stock of PPP-related commitments in present value terms (as of 2024): estimated at 3 percent of GDP (below legal limit of 12 percent). - Authorities should monitor accumulation of contingent liabilities and maintain modality neutrality. ### Pension reform risks - 2024 pension reform mandates transition of SNP to a notional defined contribution system by 2030 and facilitates switching between public and private systems. - Reform weakened in September 2025 with approval of eighth round of private pension withdrawals; exclusion from minimum pension for affiliates who withdraw entirety of funds was removed, adding long-term fiscal costs. - Current SNP reserves cover about three years of pension payouts (0.6% of GDP annually). - Recommendation: examine risks before implementing 2024 pension reform—focus on benefit rule design, withdrawal regulations, and switching arrangements. ### Boxed diagnostics and PFM efficiency issues - Public spending rigidity and efficiency: - Expenses hard to revise make up about 60 percent of primary spending (MEF, 2026). - Public wages grew almost 60 percent in real terms over last decade, producing a 35 percent premium vis-à-vis private sector wages (World Bank, 2025) versus 13 percent in average emerging market (IMF, 2025). - Peru lags in public spending efficiency in health, education, public infrastructure; municipal and regional capacity constraints led to abandonment of thousands of projects. - PFM reforms recommended: - Public procurement rationalization (demand consolidation, item bundling). - Robust multi-year decision frameworks and integrated public investment management extending to SOEs. - Improve interoperability of information systems and reliability of capital expenditure projections. - Independent proposal reviews and systematic ex-post evaluations. ### Monetary policy stance, exchange rate, and interventions - Finding: With inflation expectations firmly anchored and output gap expected to remain closed, a broadly neutral monetary policy stance remains appropriate. - Key statistics: - BCRP policy rate: 4.25 percent. - Implied ex-ante real rate as of end-February 2026: 2.1 percent. - Estimated neutral rate: 2 percent. - Exchange rate operations: - Spot market purchases between November 2025 and February 2026: cumulative US$6.2 billion. - Decrease in outstanding stock of FX Swaps (sell) between start of 2025 and February 2026: US$12.3 billion. - PEN appreciation over the year relative to the USD: about 10 percent; March 2026: PEN depreciated by 3 percent amid Middle East conflict uncertainty. - Recommendation: maintain exchange rate flexibility and keep monetary policy data dependent; be ready to tighten if second-round effects threaten inflation expectations. ### Financial deepening, credit, and private pension withdrawals - Credit-to-GDP ratio: declined from 42 percent at end-2019 to 35 percent at end-2025. - Credit-to-GDP gap: -3.5 percentage points in 2025Q4. - AFP overall portfolios: declined from 22 to 10 percent of GDP between end-2019 and end-2025. - Private pension withdrawals: - Eight withdrawals cumulatively amounted to 12 percent of 2025 GDP and 80 percent of assets under management in 2019. - First seven rounds: AFP members withdrew PEN115 billion; requested additional PEN24 billion as of January 2026 in latest round approved September 2025. - Recurrent withdrawals reduced AFP portfolio yields and severely impacted the domestic corporate bond market. - Policy recommendations: - Avoid further rounds of private pension withdrawals to safeguard domestic capital markets. - Promote competition and innovation (Open Banking and Finance frameworks) while maintaining risk-based regulation. - Ease firms’ access to capital markets and diversify funding sources. ### Illegal mining: causes, impacts, and required response - Evidence and magnitude: - Peru is the largest exporter of illegal gold in the region; illegal gold reached levels similar to legal gold production in 2025. - Staff estimate: illegal copper production may account for up to 5 percent of copper exports in 2024. - STRs related to illegal mining averaged 1 percent of GDP per year between 2020 and 2024. - Machine-learning analysis (random forest) on 2018–2024 data: median district-level probability of illegal mining increased 7.8 pp between 2018 and 2024, with 4 pp increase between 2023 and 2024; 56 percent of districts experienced an increase. - Over 80 percent of districts with legal mining production were above 50 percent probability of illegal mining. - Effects: reduces legal mining investment, delays projects, generates illicit financial flows, weakens property rights, undermines financial integrity. - Policy response recommended: - Coordinated approach to close legal gaps and establish clear formalization pathways; avoid weakening property rights of concessions. - Enhance state capacity in security, enforcement, and financial supervision. - Adopt supply-chain enforcement (processing plants, mineral traders, downstream operators). - Strengthen anti-corruption institutions and implement supply-side policies to reduce incentives for illegal mining. - Legislative step: expansion of definition of illegal mining as a crime to downstream processing activities is welcome. ### Authorities’ views and staff appraisal - Authorities: - Growth view: could decrease from 3.4 percent in 2025 to 3.2 percent in 2026 due to negative supply shocks; emphasize favorable metal prices and continued private investment expansion in 2026Q1. - Fiscal view: expect to meet 2026 deficit target supported by growth prospects, procurement efficiency improvements, and purchase restrictions; Acuerdo Fiscal seen as facilitating public debate on fiscal sustainability. - Financial view: avoid further pension withdrawals; aim to ensure Petroperú financial viability without renouncing public ownership. - Staff appraisal: - Additional effort of about 0.2 percent of GDP in 2026 and 0.9 percent of GDP by 2028 needed to meet the fiscal rule at current policies. - Priorities: address rising budget rigidities, improve public procurement and investment quality, target any fiscal support to most vulnerable with sunset clauses, and raise tax-to-GDP ratio beyond current TOT cycle to close infrastructure and social gaps. ### Risk assessments and medium-term outlook - DSA and realism assessment: - Overall risk of sovereign stress: Low. - Medium-term liquidity risks: low; average baseline GFN: 3.6 1.2 (percent of GDP). - Debt fanchart width and indicators: Fanchart width: 38.9 0.6 (percent of GDP); Probability of debt non-stabilization: 58.7 0.5 (percent). - Annex IV Risk Matrix highlights (selected): - Protracted war in the Middle East: Likelihood: High; Expected Impact: High; Policy response: adjust monetary policy, allow ER to absorb shocks, targeted fiscal support with sunset clauses. - Commodity Price Volatility: Likelihood: High; Expected Impact: Medium; Policy response: adjust monetary policy, allow ER to play shock-absorber, targeted fiscal support. - Insecurity and illegal mining: Likelihood: Medium; Expected Impact: High; Policy response: coordinated policy response to address illegal mining and insecurity. ### Key macro projections and indicators (selected series as reported) - Gross international reserves (in billions of U.S. dollars, reported sequence): "78.5 72.2 71.3 79.2 90.3 100.1 105.1 107.5 109.7 111.8 113.8" - Public sector debt/GDP (selected sequence): "35.5 33.5 32.4 32.1 30.2 30.0 30.9 31.6 32.1 32.1 32.2" - NFPS overall balance (percent of GDP, selected sequence): "-2.5 -1.7 -2.7 -3.5 -2.2 -2.0 -2.0 -1.9 -1.8 -1.7 -1.6" - Consumer prices (end of period, selected): "6.4 8.5 3.2 2.0 1.5 2.5 2.0 2.0 2.0 2.0 2.0" - Real GDP growth (selected projection years sequence): "1 3.4 2.8 -0.4 3.5 3.4 2.8 2.8 2.8 2.8 2.8 2.8" *Source: IMF staff report — "1. Boosting Potential Growth" (1perea2026001).* ### 1. Boosting Potential Growth ____________________________________________________________________ 10 ### 1. Boosting Potential Growth ### Macroeconomic context and recent performance - Peru benefited from "the most favorable terms of trade since the 1950s" driven by high metal prices and low import costs; confidence rose despite higher global oil prices and volatility in copper and gold. - Business and consumer confidence reached their highest levels since 2020. - Political instability increased, culminating in the impeachment of President Boluarte in October 2025 and President Jerí in February 2026, creating a highly uncertain landscape ahead of the April 2026 general elections. - Real GDP expanded 3.4 percent in 2025, bringing economic activity close to potential. - Private investment grew 10 percent in 2025—its strongest pace since 2013 excluding the post-pandemic rebound. - Unemployment declined to 5.0 percent in December 2025 (from 5.5 percent in 2024). - Adequate employment rate reached 62.5 percent in December 2025; real wage growth averaged 1.8 percent in 2025. - Labor force participation remains below pre-pandemic levels and informality remains very high. ### Monetary and inflation developments - Headline, core, and 12‑month ahead inflation expectations were within the 1–3 percent target band throughout 2025: 1.5 percent (headline), 1.8 percent (core), and 2.1 percent (expectations) in December 2025. - The BCRP reduced the policy rate by 75 bps in 2025 to 4.25 percent. - Early 2026 shocks: intense rainfall disrupted agricultural supply chains in February 2026; an explosion in the Camisea natural gas pipeline in March 2026 collapsed gas supply for 2 weeks and increased domestic energy prices. - Headline and core inflation rose to 3.8 percent and 3.6 percent, respectively, in March 2026. ### Fiscal developments and public debt - NFPS deficit fell from 3.5 percent of GDP in 2024 to 2.2 percent in 2025—the fiscal rule target. - Structural deficit stood at 3.6 percent of potential GDP in 2025 prices (MEF, 2026). - About one third of the consolidation was driven by higher tax revenue (bolstered by higher TOT and expected rebound in tax collections including CIT and regularizations); additional gains from a tax amnesty, capital gains taxes on large corporate asset sales, and tax assessments. - General government expenditure dropped in GDP terms; consolidation included moderation in wages and goods and services, restrained public investment, and lower financial support to Petroperú. - Gross public debt fell from 32.1 to 30.2 percent of GDP in 2025; total public assets declined from 8.6 percent of GDP in 2024 to 7.4 percent in 2025. - Emergency Decree 8/2025 measures to reduce non-essential current spending and prioritize public investment projects expired at end-2025. ### External sector and buffers - Current account recorded a surplus of 3.1 percent of GDP in 2025. - Real effective exchange rate appreciated by 4 percent in 2025. - International reserves reached a record high of US$90.3 billion at end-2025 (27 percent of GDP and 268 percent of the ARA metric). - Peru’s external position in 2025 was stronger than levels implied by fundamentals and desirable policies, driven by strong private savings and subdued investment despite a 2025 investment recovery. ### Financial sector and credit - Banking system remained well capitalized and liquid: total capital ratio was 17.9 percent and LCR stood at 166.9 percent by end-2025. - NPL ratio declined to 3.5 percent by end-2025 (peak 4.6 percent in March 2024). - Credit-to-GDP gap was negative at -3.5 percentage points in 2025Q4, recovering slightly from –3.6 pp in 2025Q1. - Long-term sovereign yields declined to 5.9 percent in 2025Q4 (from 6.6 percent a year earlier). - Stock prices rose 98 percent between start of 2025 and peak at end-February 2026, then fell 13 percent in March 2026 amid Middle East conflict and commodity price volatility. ### Outlook, projections, and risks - Baseline projection (limited spillovers from a short-lived Middle East war): growth slows to 2.8 percent in 2026; potential growth marginally improves to 2.8 percent owing to favorable metal prices (Box 1). - Headline and core inflation expected to temporarily exceed the 1–3 percent band before decelerating to 2.5 percent toward end-2026. - Current account projected to remain in surplus of 3.4 percent of GDP in 2026, gradually shifting to a deficit and stabilizing around a deficit of about 0.8 percent of GDP as TOT normalize and private investment grows. - Under current policies, fiscal deficit narrows but remains above rule in medium term; public debt stabilizes around 32 percent of GDP—above the 30 percent of GDP legal limit by 2035. - Balance of risks tilted to the downside: key domestic risks include political uncertainty, social unrest, weather-related shocks, and persistently high insecurity and illegal mining. External risks include a protracted Middle East conflict, upside inflation risks, regional geopolitical tensions, protectionism, trade disruptions, and a disorderly AI correction. - Upside scenario: higher-than-expected growth if high metal prices spur stronger private investment or if post-election political stability enables structural reforms. ### Box 1: Role of metal prices and potential growth - Minerals account for about 66 percent of Peru’s exports; copper and gold comprised 45 and 38 percent of mineral exports in 2025, respectively. - The 2000s commodity boom (notably copper and gold price increases) coincided with real GDP growth averaging around 6 percent and a boom in mining investments. - Since 2012, negative productivity growth and low private investment led to declining potential growth. - A US$64 billion pipeline of mining projects could raise potential growth by 0.5-1 pp, but many projects are stalled due to bureaucratic complexity, social conflicts, illegal mining, and illicit financial flows that threaten Peru’s attractiveness for mining investment. - Growth-enhancing reforms and prudent macroeconomic management in the 2000s supported higher-than-predicted growth given strong TOT, including inflation targeting, fiscal rules, trade and financial liberalization, infrastructure improvements, and reforms in healthcare, education, civil service, pensions, and taxes. *Source: IMF staff report — "1. Boosting Potential Growth".* ### 13. A prolonged global energy shock would significantly deteriorate the near-term ### 13. A prolonged global energy shock would significantly deteriorate the near-term ### Impact of a prolonged global energy shock (scenario) - Scenario assumption: oil prices approximately double in 2026 and in 2027 compared to the baseline assumption. - Baseline average petroleum spot prices: US$82 and US$76 per barrel in the baseline scenario for 2026 and 2027, respectively. - Real economy impact: - Higher energy prices and lower global demand—including its effect on metal export prices—would lower economic growth by about 1-1.5 pp in both years. - Inflation could increase by up to 1.5 pp, bringing headline CPI above the target band. - Macroeconomic balances would weaken all else equal, though high metal prices would still support terms of trade. - Growth impact could be partially offset by a boost in exports from currency depreciation due to tighter global financial conditions. - Policy responses under the scenario: - Tighter monetary policy to prevent second-round effects from the inflationary shock. - Possibly some targeted fiscal offset if automatic stabilizers are insufficient to counter the shock. - Domestic context reinforcing resilience: - Peru’s macroeconomic resilience is reinforced by very strong buffers including low public debt, abundant international reserves, and access to international capital markets on favorable terms. - Note on focus: Since Peru produces natural gas locally, international price changes have little effect on domestic gas prices; thus, the scenario focuses only on oil price impacts. ### Reigniting a reform momentum (opportunity and priorities) - The current favorable terms of trade provide a unique opportunity to undertake ambitious reforms. - Key reform priorities and expected benefits: - Implementing a credible fiscal consolidation plan would create space to close critical social and infrastructure spending gaps within the fiscal rule. - Address illegal mining and security challenges along with other structural barriers to investment and potential growth to help rebalance the external position and achieve a stronger medium-term growth outlook. - Continue monitoring financial system risks and close financial regulatory gaps. ### A. Addressing structural fiscal challenges — findings and recommendations - Recent fiscal path and risks: - The approved Budget Law for 2026 and the authorities’ medium-term macroeconomic framework project an appropriate fiscal path, but rely on unidentified measures. - The 2026 Budget foresees an increase in the share of current spending (mostly wages) and of assignments to regional and local governments, in line with recent trends; these increases would come at the expense of public investment. - The authorities’ 2026-2029 multiannual macroeconomic framework plans to meet the 2026 fiscal deficit target of 1.8 percent of GDP through both current and capital spending restraint. - In the medium term, revenues would remain stable while interest payments would increase marginally, and further consolidation in current spending and in public investment would bring the fiscal deficit to its legal limit of 1 percent of GDP by 2028. - Fiscal gap and consolidation needs: - Without additional measures, the fiscal deficit would miss the fiscal rule target by 0.2 percent of GDP in 2026 and 0.9 percent of GDP in 2028. - Consolidation of at least 0.9 percent of GDP to meet the 2028 fiscal target could be obtained by: - i) slowing ongoing trends in public employment and public as primary education, health, and the regional government level; - ii) improving procurement practices (World Bank, 2025); - iii) adopting PFM measures to improve the efficiency of public investment, as large capital spending-to-GDP ratios have produced modest gains and high project abandonment, especially at the subnational level. - Ongoing reforms at Petroperú could reduce costs stemming from poor management and rising liabilities at the company, supporting the authorities’ fiscal objectives. - Any fiscal support in response to shocks should be targeted to the most vulnerable, feature clear sunset clauses, and avoid distorting hydrocarbon prices. - Revenue-side and structural reforms: - Revenue reforms will be needed to close fundamental infrastructure and social gaps. - Estimates suggest closing Peru’s infrastructural gaps over 2019-2030 could require resources equivalent to almost 50 percent of 2019 GDP (IDB, 2021). - Priorities include: - reducing informality, especially in the critical mineral sector; - removing inefficient tax expenditures such as those for agro-exporters and SEZs; - homogenizing the tax treatment on capital and labor income; - reviewing excise taxation; - facilitating tax compliance, including through digitalization, rationalization of existing MSME tax regimes, and certainty of interpretation of tax laws. - In terms of tax policy, raising the PIT exemption threshold would help align the composition of fiscal revenues to regional and OECD averages (OECD, 2025), while the progressivity of the mining tax regime could be enhanced. - Continued modernization of the tax administration (SUNAT) can reduce high VAT and CIT non-compliance through the implementation of dedicated Compliance Improvement Plans and consolidate recent TA-driven improvements in customs management. - The Acuerdo Fiscal is a welcome recent government initiative to facilitate the public debate around fiscal sustainability, spending efficiency, and tax base expansion. - Fiscal numbers and projections (selected, as reported): - Revenues (GG): 19.1 19.2 19.4 0.2 19.2 19.3 0.1 19.2 19.3 0.1 19.2 19.3 0.2 - Taxes: 14.8 15.0 15.1 0.2 15.0 15.1 0.1 15.0 15.0 0.0 15.0 15.1 0.1 - Primary Expenditure (GG): 20.0 19.3 19.8 0.5 18.9 19.7 0.8 18.5 19.5 1.0 18.5 19.4 0.9 - Current: 14.3 14.0 14.4 0.4 13.7 14.2 0.5 13.3 14.0 0.7 13.2 13.9 0.7 - Capital: 5.6 5.3 5.4 0.1 5.2 5.4 0.2 5.2 5.5 0.3 5.4 5.6 0.2 - Primary Balance (GG): -0.9 -0.1 -0.4 -0.3 0.3 -0.4 -0.6 0.7 -0.3 -0.9 0.6 -0.1 -0.7 - Interest: 1.6 1.7 1.7 0.0 1.8 1.7 -0.1 1.8 1.7 -0.1 1.7 1.7 0.0 - SOEs Net Operating Balance: 0.3 0.1 0.1 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.1 0.0 -0.1 - Overall Balance (NFPS): -2.2 -1.8 -2.0 -0.2 -1.4 -2.0 -0.6 -1.0 -1.9 -0.9 -1.0 -1.8 -0.8 - Potential savings from spending measures (2028, percent of GDP, as presented): - NFPS deficit: Baseline 1.9 -> Recommended 1.0 - GG Current spending: Baseline 14.0 -> Recommended 13.3 - Suggested savings: - Wage control 0.3 - Transfer decompression 0.2 - Procurement improvements 0.1 - GG Capital spending: Baseline 5.5 -> Recommended 5.2 - Suggested savings: - FONCOMUN reform savings 0.2 - Efficiency improvements 0.1 - Gap with fiscal rule: 0.9 -> 0.0 - Public investment and PPPs: - Over 2024-2025, the authorities awarded about 20 PPP projects and more than 600 works-for-taxes (OxI), equivalent to a yearly estimated average of US$3.7 billion and US$1.3 billion, respectively. - The increase was accompanied by two laws adopted in 2025, which reorganized the PPP governing framework and greatly expanded the OxI scheme. The legal limit for subnational governments to award OxI was also progressively raised to about 6 percent of GDP in 2025. - The authorities should closely monitor the accumulation of contingent liabilities and maintain neutrality when it comes to investment modality selection. - As of 2024, the net stock of PPP-related commitments in present value terms was estimated at 3 percent of GDP, below the legal limit of 12 percent. - Pension reform risks: - The implementation of the 2024 pension reform should proceed cautiously until the associated risks have been mitigated to ensure fiscal sustainability and stability of the pension system. - The reform mandates transition of the SNP to a notional defined contribution system by 2030 and facilitates switching between the public and private systems. - The original reform was significantly weakened in September 2025 upon approval of the eighth round of private pension withdrawals; exclusion from the minimum pension for affiliates who withdraw the entirety of their pension funds was removed, adding to long-term fiscal costs. - Current SNP reserves cover about three years of pension payouts (0.6% of GDP annually). - Authorities should examine risks before implementing the 2024 pension reform, focusing on pension benefit rule design, withdrawal regulations, and switching arrangements. ### Boxed diagnostics and efficiency issues (summary) - Public spending rigidity and efficiency: - Expenses hard to revise make up about 60 percent of primary spending (MEF, 2026). - Public wages have grown by almost 60 percent in real terms over the last decade, resulting in a 35 percent premium vis-à-vis private sector wages (World Bank, 2025), compared with 13 percent in the average emerging market (IMF, 2025). - Peru lags in public spending efficiency in health, education, and public infrastructure; involvement of municipal and regional governments with limited skills has led to abandonment of thousands of infrastructure projects (Contraloría General de la República, 2025). - PFM reforms recommended: - Public procurement rationalization (demand consolidation, item bundling). - Robust multi-year decision frameworks and integrated public investment management extending to SOEs. - Improve interoperability of information systems and reliability of capital expenditure projections. - Independent proposal reviews and systematic ex-post evaluations to raise chances of project success. *Source: INTERNATIONAL MONETARY FUND (Peru chapter).* ### 19. With inflation expectations firmly anchored and the output gap expected to remain ### 19. With inflation expectations firmly anchored and the output gap expected to remain ### Monetary policy stance - Finding: With inflation expectations firmly anchored and the output gap expected to remain closed, a broadly neutral monetary policy stance remains appropriate. - Key statistics: - BCRP policy rate: 4.25 percent. - Implied ex-ante real rate as of end-February 2026: 2.1 percent. - Estimated neutral rate: 2 percent. - Recommendation: Monetary policy should remain data dependent given elevated external and domestic uncertainty from multiple supply shocks, and be ready to tighten if second-round effects materialize and inflation expectations threaten to move higher. ### Exchange rate policy and interventions - Finding: The BCRP should continue to allow exchange rate flexibility to cushion external shocks. - Drivers of appreciation pressures in 2025: - Global weakening of the US dollar. - Historically high terms of trade. - Strong interest from nonresident investors for Peruvian securities. - Liquidation of AFP foreign assets in the context of the eighth private pension withdrawal round. - Central bank operations and outcomes: - Spot market purchases between November 2025 and February 2026: cumulative US$6.2 billion. - Decrease in outstanding stock of FX Swaps (sell) between start of 2025 and February 2026: US$12.3 billion. - PEN appreciation over the year relative to the USD: about 10 percent (less than most other LA5 currencies) and accompanied by lower volatility. - March 2026: PEN depreciated by 3 percent amid heightened global uncertainty surrounding the conflict in the Middle East. - Recommendation: Maintain exchange rate flexibility (see Annex V of the 2024 Article IV). ### Financial sector resilience and stress testing - Finding: Systemic financial stability risks remain contained. - Evidence: - SBS top-down stress tests suggest the banking system would remain sound even under adverse scenarios. - Interconnectedness analysis indicates contagion risks are limited. - Foreign funding share of total bank liabilities (September 2025): 7 percent. - Banks’ net open FX positions: small. ### Financial deepening and credit growth - Finding: Expansion of digital finance is increasing access and credit to the private sector accelerated toward end-2025, but overall credit dynamics have stalled relative to pre-pandemic growth. - Key points: - Credit-to-GDP ratio grew over 10 percent in the pre-pandemic decade; its growth has since stalled, implying a period of “credit-less” growth. - Credit-to-GDP is experiencing a cyclical downturn reflecting reduced demand for credit due to growth impediments and abundant liquidity from AFP withdrawals and high mining profits, including from illegal mining. - Structural challenges constraining credit expansion: high informality in labor and real estate markets, limited financial literacy, limited usage and access to financial services. - Longstanding banking system features: high average lending rates (especially consumer and small/micro business), high operating costs, high market concentration (top 4 commercial banks account for 69 percent of commercial banking sector assets; 67 percent of financial sector assets), Herfindahl Index (assets) at 2,000. - Policy options to improve financial deepening: - Promote competition and innovation while maintaining appropriate risk-based regulation. - Promote Open Banking and Finance frameworks. ### Private pension withdrawals and capital markets - Finding: Further rounds of private pension withdrawals should be avoided to safeguard domestic capital markets and promote diversification of funding sources. - Key statistics and impacts: - Eight withdrawals cumulatively amounted to 12 percent of 2025 GDP and 80 percent of assets under management in 2019. - In the first seven rounds, AFP members withdrew PEN115 billion, and had requested an additional PEN24 billion for withdrawal (as of January 2026) in the latest round approved in September 2025. - Recurrent withdrawals reduced AFP portfolio yields (reportedly due to liquidation of assets at a discount and reallocation toward more liquid assets). - AFPs are the largest investor in domestic corporate bonds; withdrawals have severely impacted the depth and long-term financing capacity of domestic capital markets. ### Regulatory measures to enhance resilience - Recent and planned regulatory steps: - SBS measure to standardize the definition of unhedged FX borrowers is welcome (SBS Resolution 0774-2025, effect June 2026). - Most banks meet SBS‘s Basel III-aligned capital requirements (consistent with 2018 FSAP recommendations). - Authorities plan to review activation criteria for the counter-cyclical capital buffer to align with the financial cycle, possibly using criteria based on credit-to-GDP. - SBS proposed increasing risk weights for unhedged FX loans and modifying standardized regulatory provisioning rates to better reflect expected lifetime losses by loan classification (intermediate step toward full IFRS9 implementation). - Recovery plans for domestic systemically important banks submitted for review; planned extension to group-level recovery and resolution planning. - Legal framework amendment recommended to grant SBS powers for full consolidated supervision (following FSAP recommendations). ### Investment, potential growth, and structural impediments - Finding: Record-high terms of trade (TOT) present an opportunity to revitalize investment and growth, but recent structural impediments must be addressed. - Constraints on investment: - Persistent political volatility and high political fragmentation causing policy unpredictability and impeding major reforms. - Rapid rise in insecurity weakening the business environment and contributing to impunity; insecurity estimated to cost about 2.2 percent of GDP per year (increased operations costs, decreased productivity, disincentivized investment). - Policy recommendations: - Update fiscal decentralization framework and redesign natural resource revenue-sharing formulas to unlock mining investment and ensure mineral wealth benefits citizens. - Continue PPP reforms and efforts to cut red tape. - Reform labor and tax regulations that impose excessive costs for formalizing or growing businesses. - Enhance independence and integrity of judicial bodies to end corruption impunity. - Build resilience to natural disasters. - Embrace opportunities from digital technologies and artificial intelligence. - Pursue OECD accession roadmap to boost business climate, reduce informality, and reform civil service to increase productivity, investment, and public spending efficiency. ### Illegal mining: causes, impacts, and required response - Finding: High metal prices have triggered a rapid rise in illegal mining, which threatens legal mining and copper production and has broad socioeconomic and financial integrity costs. - Key evidence: - Peru is the largest exporter of illegal gold in the region; illegal gold reached levels similar to legal gold production in 2025. - Staff estimate: illegal copper production may account for up to 5 percent of copper exports in 2024. - Between 2020 and 2024, the value of suspicious transaction reports (STRs) related to illegal mining received by the SBS’ Financial Intelligence Unit averaged 1 percent of GDP per year. - One SD illegal mining shock equivalent to an 11.9 p.p. increase in the probability of illegal mining (used in staff calculations). - Machine-learning analysis (random forest) trained on 2018–2024 data finds median district-level probability of illegal mining increased 7.8 pp between 2018 and 2024, with 4 pp of that increase occurring between 2023 and 2024; 56 percent of districts experienced an increase in probability. - Over 80 percent of districts with legal mining production were above 50 percent probability of illegal mining. - Effects: - Illegal mining reduces investments by legal mining companies across project life cycles, delays investments, generates uncertainty and illicit financial flows, opens corruption vulnerabilities, weakens property rights, and undermines financial integrity. - Policy response recommended: - Coordinated response to close legal gaps and establish clear pathways to formalization; avoid measures that weaken property rights of mining concessions. - Enhance state capacity in security, enforcement, and financial supervision. - Adopt a supply-chain approach to enforcement (improve supervision of processing plants, mineral traders, and downstream operators). - Support efforts with inter-agency, regional, and international cooperation. - Strengthen anti-corruption institutions. - Implement supply-side policies to reduce incentives to engage in illegal mining. - Recent legislative step: expansion of the definition of illegal mining as a crime to downstream processing activities is welcome. ### Authorities' views - Growth outlook: - Authorities considered growth could decrease from 3.4 percent in 2025 to 3.2 percent in 2026 due to negative supply shocks. - They emphasize metal prices remain favorable, high-frequency indicators point to continued expansion of private investment during 2026Q1, and expectations remain optimistic. - Authorities foresee high metal prices maintaining a current account surplus in 2026 and 2027 and expect higher metal prices to boost growth and private investment in the medium term. - Risks: - Authorities acknowledge significant downside risks: a prolonged conflict in the Middle East could impact inflation expectations and prices beyond oil (particularly fertilizers), producing second-round effects on inflation and growth. - Upside: strong private investment growth, including in mining, could boost potential growth and support medium-term growth rates above 3 percent. *Source: IMF staff report (Peru).* ### 31. The authorities concurred that a broadly neutral monetary policy is appropriate and ### 1perea2026001 - 31. The authorities concurred that a broadly neutral monetary policy is appropriate and ### Monetary policy, exchange rate, and inflation - Authorities view a broadly neutral monetary policy as appropriate and will continue to allow the exchange rate to act as a shock absorber. - Aggregate supply shocks could put temporary upward pressure on inflation; inflation expectations are described as well anchored. - The output gap could remain neutral in 2026-2027; monetary policy should remain data dependent to maintain inflation within the target range. - Given partial financial dollarization, the authorities conduct limited and discretionary FX interventions to mitigate episodes of excessive short-term volatility while allowing exchange rate flexibility and remaining fully consistent with the inflation-targeting framework. - Interventions are aligned with the BCRP’s reserve accumulation policy aimed at strengthening buffers and preserving sufficient space to intervene in either direction if warranted by market conditions. - Staff appraisal: - Energy prices would temporarily raise inflation above the upper range of the BCRP target band in 2026. - The estimated ex-ante real rate stood at 2.15 percent as of end-February 2026, slightly above the neutral rate of 2 percent. - Recommendation: monetary policy should remain data dependent given multiple supply shocks and elevated uncertainty surrounding short-term inflationary pressures and inflation expectations. Continued exchange rate flexibility should be maintained. ### Fiscal policy, fiscal sustainability, and public investment - Authorities emphasize preserving fiscal sustainability and are preparing the transition for the next administration. - They expect to meet the 2026 deficit target, supported by strong growth prospects, improvements in procurement efficiency, and restrictions on government purchases. - The recent Acuerdo Fiscal is expected to facilitate public debate on fiscal sustainability, spending efficiency, and tax base widening. - Authorities do not anticipate significant fiscal costs from the energy shocks but are monitoring higher oil prices; in a protracted crisis they are assessing targeted support measures to limit fiscal costs. - Authorities agree with staff concerns over increasing budget rigidities and crowding out of public investment and consider objecting to unfunded legislative measures that did not find support in the Council of Ministers. - PPPs and OxIs are noted as contributors to stronger investment execution; authorities evaluate strategies to ensure Petroperú’s continued operations and expect ongoing reorganization to make it financially viable and attractive to investors without renouncing public ownership. - Staff appraisal: - The 2026 budget targets a narrowing of the fiscal deficit to 1.8 percent of GDP through stronger revenues and some expenditure rationalization. - At current policies, staff projects that an additional effort of about 0.2 percent of GDP in 2026 and 0.9 percent of GDP by 2028 will be needed to meet the fiscal rule. - Priorities: address rising budget rigidities (growing wage and pension pressures), systematically improve quality and efficiency of public procurement and investment. - Fiscal restraint recommendations: any fiscal support should be targeted to the most vulnerable, feature clear sunset clauses, and avoid distorting hydrocarbon prices. - To close infrastructure and social gaps, reforms are needed to durably raise the low tax-to-GDP ratio beyond the current TOT cycle. ### Financial system soundness, regulation, and supervision - Authorities consider the financial system sound with limited systemic risks: capital ratios well above regulatory requirements, profitability recovered to pre-pandemic levels, ample liquidity in domestic and foreign currency, declining NPL ratios after their 2024 peak, low foreign funding share of liabilities, and limited unhedged FX exposures. - Stress tests indicate the banking system could sustain severe adverse shocks; contagion risks from interconnectedness are limited. - Authorities are working on a new activation criterion for counter-cyclical policy based on the credit-to -GDP gap, expected to be completed this year. - Regulatory changes in progress: revising provisions towards an IFRS 9-like framework and recalibrating risk weights for unhedged FX exposures aligned with Basel III. - A new standardized methodology to define unhedged exposures takes effect in June 2026 to enhance assessment of FX exposure risks. - Staff appraisal recommendations: fully operationalize new regulations, close remaining regulatory gaps, review activation criteria for the counter-cyclical capital buffer, extend recovery plans for systemically important domestic banks to the financial group level and to their resolution planning thereafter, and amend the legal framework to grant SBS powers to exercise full consolidated supervision. ### Credit, financial deepening, digital finance, and pensions - With strong economic activity, credit does not appear to be a bottleneck; subdued credit growth post-pandemic reflected various demand and supply causes. - Higher growth momentum of credit in recent months may mark an inflection point in the credit cycle, supported by very favorable terms of trade and an acceleration in private investment. - Digital finance products have rapidly expanded access to financial services. - AFP withdrawals have contributed to a reduction in the depth of domestic capital markets; authorities underscore the importance of preserving long-term savings and domestic financial intermediation and indicate further rounds of withdrawals should be avoided. - Staff appraisal: - Financial deepening has stalled, possibly due to high labor informality, low financial literacy, and limited usage and access to financial services. - Credit-to-GDP remains below pre-pandemic levels; the cyclical downturn reflects weak demand for credit from subdued private investment and abundant liquidity from AFP withdrawals and high mining profits, including from illegal mining. - Policy suggestions: promote competition and innovation (e.g., Open Banking and Finance frameworks) to address structural challenges. - Private pension withdrawals are deemed detrimental to domestic capital markets: recurrent withdrawals reduced AFP portfolio yields and severely impacted domestic capital markets given AFPs are the largest investor in domestic corporate bonds. ### Illegal mining and structural reform priorities - Authorities recognize a rise in illegal mining, particularly in gold, and accept that illegal mining could negatively impact formal mining investment and socioeconomic outcomes, institutional quality, and crime. - Illegal mining is characterized as now the largest illegal activity in Peru and presenting the most serious risk to money laundering and illicit financial transactions; regulatory standards and supervision of banks are said to adequately incorporate illegal mining as a risk factor. - Authorities plan to increase enforcement along the supply chain, close existing legal gaps, and advance the structural reform agenda to address impediments to private investment and durably increase potential growth. - Staff appraisal recommendations: - Urgent action required to prevent illegal mining from becoming an entrenched macro-critical issue that would discourage legal mining investment and harm growth, labor markets, security, development outcomes, and financial integrity. - Recent legislation expanding the definition of illegal mining as a crime to downstream processing activities is welcome. - Additional efforts needed to close remaining legal gaps, establish clear pathways to formalization, enhance anti-corruption institutions and state capacity in security, enforcement, and financial supervision. - Supply-side policies are essential to reduce incentives to engage in illegal mining. ### Growth outlook, external position, and macro risks (staff appraisal) - After strong momentum supported by record-high TOT, growth is projected to moderate in 2026, with high metal prices largely offsetting the temporary energy price shock. - Domestic demand is expected to remain resilient despite some headwinds from the electoral period and higher energy prices; favorable metal prices are projected to boost investment and improve potential growth. - Credit growth is expected to continue a moderate recovery. - The current account surplus is projected to persist in the next years, sustained by favorable TOT and a slow increase in private investment. - The external position in 2025 was stronger than the level implied by fundamentals and desirable policies, due to strong private savings and still subdued investment. - The balance of risks is tilted to the downside, dominated by elevated uncertainty from the impact of the war in the Middle East; Peru maintains ample buffers and very strong macroeconomic and institutional policy frameworks. ### Structural reform agenda summary - Priorities to leverage the favorable TOT and improve potential growth include: - Updating the fiscal decentralization framework. - Redesigning natural resource revenue-sharing formulas to ensure all citizens benefit from the mining windfall. - Reforming labor and tax regulations that impose excessive costs for formalizing or growing a business. - Enhancing the independence and integrity of judicial bodies to end corruption impunity. - Building resilience to natural disasters. - Embracing opportunities from digital technologies and artificial intelligence. *Source: 1perea2026001 - excerpted text.* ### 45. Staff recommends that the next Article IV consultation take place on the standard 12- ### 45. Staff recommends that the next Article IV consultation take place on the standard 12-month cycle. ### Real sector and inflation - Growth in 2025 remained strong, underpinned by domestic demand. - Labor markets were robust and unemployment declined. - Inflation remained close to the midpoint of the target band, "...due to low food and energy prices." - Growth was supported by sustained private consumption and a rebound in private investment, as business confidence reached its highest level since 2020. - Note on indicators: Index values of 50 and greater indicate positive growth expectations. (Data covers the Metropolitan Lima area.) ### Fiscal developments and risks - In 2025 the fiscal deficit improved thanks to a recovery in tax revenues and resumed moderation in spending, resulting in a mildly contractionary fiscal stance as growth momentum continued and the output gap closed. - High metal prices and improved terms of trade started to translate into higher mining revenues. - The 2026 electoral cycle and rising fiscal pressures could present challenges in decisively reducing public spending. - Without structural measures, the NFPS deficit could remain above the fiscal rule limits, putting upward pressures on debt dynamics despite a relatively low public debt-to-GDP ratio. ### External sector - The trade balance continued to increase in 2025 as high metal prices underpinned extraordinary terms of trade, which more than offset a rebound in import volumes. - The current account surplus increased further as a strong trade balance offset a wider deficit in investment income. - FDI inflows remained stable while net portfolio outflows continued. ### Macrofinancial and financial stability - Global volatility spiked in early 2025 due to heightened trade tensions, increasing domestic volatility which has since receded. - Sovereign bond spreads have continued to decline, remaining among the lowest in the region. - Counter-cyclical policy activation is unlikely given the threshold is well above GDP growth projections. (Counter-cyclical policy activation rule: (i) 30-month average of GDP growth crosses the threshold from below, or (ii) the same indicator is above the threshold and 12-month average GDP growth is 2 percent higher than the one in the previous year.) - Real property prices are stable and remain aligned to fundamentals; banks’ mortgage exposures are limited. - Commercial banks actively use derivatives to maintain limited FX exposure. ### Exchange rate and central bank operations - The PEN experienced strong appreciation pressures in 2025 amid global dollar weakness and renewed interest from nonresidents for Peruvian debt, despite narrowing interest differentials with respect to the USD. - BCRP conducted spot and non-spot interventions to reduce volatility. - PEN continues to have lower volatility than other regional currencies. - FX Swap interventions series: calculated as the monthly decrease in outstanding stock of FX Swap Sell minus the monthly decrease in outstanding stock of FX Swap Purchase. ### Banking sector and monetary conditions - Lending rates in PEN to higher risk segments are structurally very high. - Credit to the private sector has shown some acceleration in recent quarters, with all segments displaying positive growth. - BCRP maintains high marginal reserve requirements in foreign currency of 35 percent. - With ample USD liquidity in the banking sector, the spread between the preferential lending rate and the SOFR has fallen to historic lows and credit dollarization has slightly increased. - BCRP abolished marginal requirements for local currency in April 2024. ### Banking sector soundness - Banks maintain ample capital buffers, well above regulatory requirements, and high levels of liquidity. - The NPL ratio has come down from its 2024 peak. - Banks have structurally high operating costs; profitability has increased due to lower credit losses and a slight recovery in interest margins. - Under full implementation of SBS’s Basel III-aligned capital requirements, minimum capital ratios are: Tier1 ratio (8.5%) = CET1 (4.5%) + conservation buffer CET1 (2.5%) + AT1 (1.5%); minimum required total capital ratio (12.5%) = minimum Tier1 ratio (8.5%) + Tier2 capital ratio (4%). ### Private Pension Funds (AFPs) - With recurrent withdrawals, assets under management have fallen sharply. - AFPs reportedly reallocated portfolios toward more liquid investments and liquidated assets at a discount, leading to a decline in yields. - The domestic corporate bond market has been severely affected. - Congress increased the legal limit to AFPs foreign investments from 50 to 80 percent in August 2025; this measure takes effect only when BCRP increases the operational limit, which currently stands at 50.5 percent. - Chart note: real year-on-year returns of Type 2 funds, which hold about two thirds of total assets under management, are used. ### Key fiscal and macro projections and indicators (selected figures from tables) - BCRP foreign currency marginal reserve requirement: 35 percent. - AFP foreign investment legal limit increased from 50 to 80 percent in August 2025; operational limit currently stands at 50.5 percent. - Gross international reserves (in billions of U.S. dollars): "78.5 72.2 71.3 79.2 90.3 100.1 105.1 107.5 109.7 111.8 113.8" (as reported in tables across years). - Public sector debt/GDP (selected): "35.5 33.5 32.4 32.1 30.2 30.0 30.9 31.6 32.1 32.1 32.2" (across projection years in tables). - NFPS overall balance (percent of GDP, selected): "-2.5 -1.7 -2.7 -3.5 -2.2 -2.0 -2.0 -1.9 -1.8 -1.7 -1.6" (table series). - Net international reserves (in millions of U.S. dollars, selected): "78,495 71,883 71,033 78,987 90,214 100,014 105,014 107,414 109,614 111,714 113,714" (table series). - Selected macro indicators from projections: consumer prices (end of period) "6.4 8.5 3.2 2.0 1.5 2.5 2.0 2.0 2.0 2.0 2.0" and Real GDP growth (selected projection years) "1 3.4 2.8 -0.4 3.5 3.4 2.8 2.8 2.8 2.8 2.8 2.8" (as tabulated). ### Policy recommendation - Staff recommends that the next Article IV consultation take place on the standard 12-month cycle. *Source: IMF staff report excerpts and tables provided in the content unit.* ### Annex I. Implementation of Staff’s 2025 Article IV ### Annex I. Implementation of Staff’s 2025 Article IV ### Fiscal Policies - Recommendations - Fiscal stance: Implement additional spending measures to comply with the 2025 fiscal target of 2.2 percent. The fiscal adjustment path over the medium term to achieve the fiscal target of a deficit of 1 percent of GDP is necessary. - Fiscal consolidation: Revenue mobilization measures are needed, including curtailing sectoral tax benefits, special regimes, and tax expenditures; strengthening tax administration; and promoting formalization to expand the tax base. Spending measures could include lowering the wage bill and discretionary transfers; increasing efficiency of public investment; and improving governance at SOEs. - Fiscal pressures: Legislative initiatives with fiscal costs should be assessed by the MEF with rigorous costing. The MEF should retain its gatekeeper role in assessing and managing the fiscal implications of PPP projects. - Policy action and assessment - Partially implemented: The NFPS deficit dropped to 2.2 percent of GDP in 2025, reflecting both spending control measures by the authorities and a significant rebound in revenues. - Authorities remain committed to a gradual fiscal consolidation consistent with the fiscal rule and expect the deficit to reach 1 percent of GDP by 2028, but still need to identify the underlying consolidation measures. - Partially implemented: The government implemented spending control measures in November 2025 and in January 2026. In December 2025, it also established the “Fiscal Agreement for Sustainable Growth.” - Recent initiatives by Congress that reduce the tax base and entail unfunded spending risk complicating future fiscal consolidation efforts. - An Emergency Decree adopted in December 2025 outlines structural reforms to be implemented at Petroperú. - Partially implemented: There are several proposals in Congress with potential fiscal costs. The recent PPP reform retained the governing role for MEF, while also expanding the role of the PPP promotion entity (ProInversión). ### Monetary and Exchange Rate Policies - Recommendations - Monetary stance: A broadly neutral monetary policy stance is appropriate. - Foreign exchange interventions (FXI): With the potential for higher exchange rate volatility due to heightened global policy uncertainty, the BCRP should continue to allow for greater ER flexibility. - Policy action and assessment - Implemented: The BCRP continued its easing cycle, lowering the policy rate from 5 percent in December 2024 to 4.25 percent in February 2026. - The ex-ante real rate stands at 2.1 percent, slightly above the estimated neutral rate. - Partially implemented: The authorities continue to allow the exchange rate to act as a shock absorber, while intervening during periods of perceived excessive volatility or disorderly market conditions. - The BCRP intervened in the spot market between November 2025 and February 2026, purchasing a cumulative US$6.2 billion, and continued to reduce its outstanding FX derivative positions by about US$12.3 billion between 2025 and February 2026, bringing the stock down to US$607 million as of February 2026. ### Financial Sector Policies - Recommendations - Macroprudential: Maintain liquidity cushions against private pension withdrawals. Reduce financial sector vulnerabilities from remaining dollarized credit with focused macroprudential policies. - Domestic capital markets: Maintain the prohibition of future pension withdrawals to protect the functioning of the domestic capital market. Expand the investor base of securities markets. - Regulation: Close key regulatory and supervisory gaps in line with the recommendations of the 2018 FSAP. Revise the activation threshold for counter-cyclical policies, given the low growth environment. - Policy action and assessment - Implemented: The repo facility for private pension funds is ready for use when necessary. - Implemented: New regulation to standardize the definition of unhedged FX borrowers will take effect in June 2026. - Partially implemented: An eighth pension withdrawal was approved in 2025. - Partially implemented: Sovereign ETFs were launched in early April 2025 to expand the investor base. - In progress: See Annex VI. The capital conservation buffer will be fully phased in by end-2026. - In progress: The counter-cyclical framework was reinstated in June 2024, but the activation threshold uses a growth rate much higher than current potential growth estimates. The authorities plan to review this activation criteria. ### Real Sector and Structural Policies - Recommendations - Productivity: Boost productivity by reforming labor and tax regulations that create barriers for formalizing or growing a business, fully embracing the digital and artificial intelligence revolution by facilitating technological diffusion and job transition, boost the business climate, reduce informality, and reform the civil service. - Climate: Scale up investments in climate adaptation and resilience. - Governance and financial integrity: Improve the effectiveness of governance institutions to end corruption impunity, including prioritizing implementation of anti-corruption frameworks and supporting these with adequate resources; enhancing the independence and effectiveness of judicial bodies; and effective use of AML tools. - Infrastructure and public investment: Strengthen the capacity to execute public investment to reduce the large infrastructure gap. Improve spending efficiency, including updating the decentralization framework and redesigning natural resource revenue-sharing formulas. - Policy action and assessment - Partially implemented: Progress has been made in advancing large infrastructure projects. The government has introduced a package of measures to counteract overregulation and excessive red tape. The informality rate declined from levels in 2023 but remains elevated. - Partially implemented: Progress has been made in enhancing public infrastructure, diversifying the energy matrix, and improving climate change statistics. - In progress: The National Board of Justice, which appoints judges and prosecutors, remains operational. Recent hiring of additional staff at the Comptroller General’s Office supports verification of asset declarations of public officials. Digitalization efforts are in progress. Judicial reform is pending. - In progress: The authorities are updating their fourth Anti-Money Laundering National Risk Assessment, which includes an action plan to mitigate ML/TF risks, with illegal mining identified as the primary ML risk in Peru. AML/CFT supervisors are applying a risk-based approach to classify suspicious transaction reports and prioritize those related to illegal mining. - In progress: The SBS is developing related early warning ML typologies and employing AI-based supervisory tools. The UIF-Peru started a joint investigation and case work with Peru’s police on illegal mining and is actively cooperating with neighboring countries to detect illicit cross-border operations. - Partially implemented: The government has advanced work on large infrastructure projects, continued to expand the PPP investment portfolio, and adopted reforms to expand funding for local investment (FONCOMUN reform) and encourage private participation in public investment, including reforming PPP and works-for-taxes legislation and raising the local cap for works-for-taxes. - Execution of public investment by local governments improved in 2025, but the infrastructure gap remains large amid capacity challenges. *Source: Annex I. Implementation of Staff’s 2025 Article IV (IMF).* ### 3. The realism assessment of the baseline scenario does not currently point to major ### 3. The realism assessment of the baseline scenario does not currently point to major concerns. ### Realism assessment of baseline assumptions - The forecast track record for the main debt drivers does not reveal any systematic bias. - The projected fiscal consolidation is within norms. - The growth forecast for real GDP in the baseline is consistent with reasonable estimates of the fiscal multiplier and converges to potential GDP growth over the forecast horizon. ### Medium-term liquidity and risk assessment - Medium-term liquidity risks are low. - GFN Financeability Module: results robust, supported by low gross financing needs and strength of macroeconomic policy frameworks and institutions. - Fanchart module: points to only moderate levels of risk. - Staff assessment: long-term risks remain low, with mechanical triggers on long-run amortization pressures mostly reflecting Peru’s history of low amortization needs. - Gross financing needs in GDP terms are expected to stay among the lowest in emerging markets. - Feasible fiscal consolidation can help address moderate financing pressures from realistic risk scenarios, including climate change adaptation and natural resource scenarios. ### DSA summary assessment and commentary - Overall risk of sovereign stress: Low. - Near term: Not applicable in cases with a disbursing IMF arrangement; otherwise performed but not published in surveillance-only or precautionary cases. (1/) - Medium term: Low, based on strength of macroeconomic policy frameworks and institutions, low gross financing needs, and availability of public assets; net public debt has been on the rise in recent years. - Gross debt: expected to stabilize in the medium term as fiscal deficits gradually moderate and with modest help from asset financing in line with Peru's recent history. - Commentary: Public debt ratio and other indicators improved since the COVID-19 pandemic despite slippages as fiscal deficit targets in fiscal rules were missed in 2023 and 2024. Public debt ratio expected to stabilize over the medium term at a level higher than in 2025 if fiscal pressures and limited efforts delay consolidation. Long-term risks manageable and would be low should authorities fully implement consolidation envisaged in the revised fiscal rules. ### Debt coverage and disclosures (DSA) - Debt coverage in the DSA: CGG GNFPS CPS Other (as listed in Figure 2). - Subsector inclusion in the baseline: - Budgetary central government: Yes - Extra budgetary funds (EBFs): Yes - Social security funds (SSFs): Yes - State governments: Yes - Local governments: Yes - Public nonfinancial corporations: Yes - Central bank: No - Other public financial corporations: No - Commentary: Figures expressed in Billions of PEN. Only includes debt securities issued by the BCG and held by the rest of the public sector. ### Public debt structure and baseline indicators - Figures presented in the source include several charts on public debt structure indicators and the baseline scenario (percent of GDP). - Figure 5 (Realism of Baseline Assumptions) reiterates that the realism analysis does not point to major concerns and that the baseline real GDP growth is consistent with reasonable fiscal multipliers. ### Medium-term quantitative indicators (from Figure 6) - Debt fanchart module: - Fanchart width: 38.9 0.6 (percent of GDP) - Probability of debt non-stabilization: 58.7 0.5 (percent) - Terminal debt-to-GDP x: 19.9 0.4 - Debt fanchart index (DFI): 1.5 - Risk signal: Moderate - Gross financing needs (GFN) module: - Average baseline GFN: 3.6 1.2 (percent of GDP) - Initial Banks' claims on the general govt: 5.0 1.6 (pct bank assets) - Change in banks' claims in stress: 3.5 1.2 (pct banks' assets) - GFN financeability index (GFI): 4.0 - Risk signal: Low - Medium-term index: Final assessment reports - Prob. of missed crisis, 2026-2031, if stress not predicted: 9.1 pct. - Prob. of false alarms, 2026-2031, if stress predicted: 52.3 pct. ### Long-term risk assessments and scenario findings - Large amortization profiles: Risks from large amortization profiles in the long term could be lowered and remain manageable and relatively modest among emerging markets. - Climate change—Adaptation scenarios (Figure 8): - Commentary: Debt in the long run expected to remain sustainable in light of climate adaptation risks, including in a custom scenario with more conservative assumptions on the impact on primary balances based on the World Bank’s CCDR model. - Consolidation in line with the fiscal rules would help secure fiscal buffers and prevent debt growth. - Natural resources scenarios (Figure 9): - Commentary: Debt in the long run expected to remain sustainable in light of natural resource discovery and depletion risks. - Consolidation in line with fiscal rules would further help secure fiscal buffers and prevent debt growth. - Even under adverse commodity price and natural disaster conditions, gross financing needs are expected to stay below or at levels comparable to those experienced during 2020. ### Annex IV — Risk Assessment Matrix: key risks, likelihoods, impacts, and policy responses - Global risks (selected entries): - Protracted war in the Middle East: - Likelihood: High - Expected Impact if Materializes: High - Policy response: Adjust monetary policy according to assessed impact on inflation and inflation expectations; allow the ER to play its role as a shock absorber; provide targeted fiscal support with clear sunset clauses that avoids distorting hydrocarbon prices. - Protectionism and Trade Disruptions: - Likelihood: High - Expected Impact: Medium - Policy response: Advance structural reform agenda; work with international community to foster cooperation; engage with major trading partners to maintain open trade policies. - Commodity Price Volatility: - Likelihood: High - Expected Impact: Medium - Policy response: Adjust monetary policy; allow ER to play shock-absorber role; provide targeted fiscal support to the most vulnerable. - Disorderly AI Correction: - Likelihood: High - Expected Impact: High - Policy response: Allow ER to play shock absorber; ER interventions if needed; accelerate de-dollarization efforts. - Policy Uncertainty: - Likelihood: High - Expected Impact: High - Policy response: Use favorable outlook to undertake reforms; continue political reform; strengthen governance and anti-corruption enforcement. - Regional Geopolitical Tensions (including Venezuela crisis): - Likelihood: High - Expected Impact: Medium - Policy response: Adjust monetary policy; allow ER role; provide targeted fiscal support to affected local populations; implement policies to integrate migrants into formal labor force. - Domestic risks (selected entries): - Social unrest: - Likelihood: Medium - Expected Impact: High - Policy response: Advance structural reform agenda; continue political reform; strengthen governance and anti-corruption enforcement. - Extreme climate events: - Likelihood: Medium - Expected Impact: High - Policy response: Promptly deploy resources for reconstruction; employ countercyclical policies; invest in resilient infrastructure and effective adaptation measures. - Insecurity and illegal mining: - Likelihood: Medium - Expected Impact: High - Policy response: Implement coordinated policy response to address illegal mining and insecurity. - Acceleration in private investment: - Likelihood: Medium - Expected Impact: High - Policy response: Reform decentralization framework to increase spending efficiency of resource-based fiscal revenues; advance structural reform agenda to secure permanent increase in potential growth. - Note on probabilities: "low" indicates probability below 10 percent, "medium" between 10 and 30 percent, and "high" between 30 and 50 percent. *Source: Fund staff.* ### Annex V. Credit-less Growth? ### Annex V. Credit-less Growth? ### Recent credit trends - Real bank credit to the private sector has remained mostly flat since the start of the pandemic, with some acceleration in the last quarters of 2025. - Credit-to-GDP ratio declined from 42 percent at end-2019 to 35 percent at end-2025. - Other funding sources (domestic and foreign) declined relative to GDP: - AFP overall portfolios declined from 22 to 10 percent of GDP between end-2019 and end-2025. - Credit from non-banks declined from 6 to 3 percent of GDP between end-2019 and end-2025. - Credit from foreign sources declined from 12 to 9 percent of GDP between end-2019 and end-2025. - The domestic corporate bond market displayed a sharp decline following successive rounds of AFP withdrawals. - Digital finance increased account ownership over the last decade (rapid adoption of mobile money accounts), but conversion from account ownership to credit issuance remains incipient. ### Structural factors and long-term trend - Credit-to-GDP trend decomposition used a two-sided HP filter with sample window 2011-2025 and smoothing parameter 16,000. - Trend behavior: - Trend credit-to-GDP increased from 30 to 40 percent between 2011 and 2015. - After 2015, the trend stalled and became decreasing in the latter years of the sample. - Possible structural constraints to financial deepening cited: high informality in labor and real estate markets, limited financial literacy, and limited usage and access to financial services. - Cross-country comparison: Peru lags the global distribution of commercial bank loans-to-GDP in the household and SME credit segments, while close to the median in other types of commercial bank loans. ### Cyclical position and quantitative indicators - The analysis shows credit is on a cyclical downturn: - Credit-to-GDP gap reported as - 3. 5 percentage points in 2025Q4. - Trough of the credit-to-GDP gap was -3.6 percentage points in 2025Q1, with a mild rebound thereafter. - In 2025, all three loan segments (corporate, consumer, mortgage) contribute negatively to the credit gap; corporate credit explains the vast majority of the gap. - Regression evidence: - Dependent variable: change in the credit-to-domestic demand (DD) ratio; independent variable: DD growth. - One additional percentage point of growth in DD has been associated with a 0.22 percentage point increase in the credit-to-DD ratio. - The constant of the regression shifted by -2.3 percentage points in the post-pandemic period, consistent with a period of “credit-less” growth despite strong economic activity. - SVAR specification and data: - Sign-restricted Structural VAR (SVAR) estimated at quarterly frequency with sample period 2011Q1-2025Q3, stochastic volatility, and up to two quarterly lags. - Endogenous variables: real credit from banks to non-financial corporates (HP-detrended, smoothing parameter 16,000), real domestic demand (HP-detrended, smoothing parameter 16,000), inflation (year-on-year growth of DD deflator), policy interest rate (BCRP reference rate), interest spread (preferential lending rate for corporates with 90-day maturity minus interbank rate; PEN and USD spreads combined via exposure-weighted average). - Exogenous global variable: copper price. ### Drivers of the cyclical downturn (SVAR Historical Decomposition) - Main driver: subdued credit demand (aggregate demand and aggregate supply shocks had the largest negative contributions in 2024 and 2025). - Contributing real-world factors: heightened political uncertainty, adverse climate events, geopolitical tensions, increasing insecurity, worsening illegal mining discouraging private investment, and abundant liquidity from AFP withdrawals possibly reducing household credit demand. - Credit supply shocks: - Positive contribution during 2020-2022 due to government programs (e.g., Reactiva). - Turned negative during 2023-2025 consistent with more conservative bank lending standards amid loan quality deterioration; magnitude of negative contribution during 2023-2025 is small, suggesting no sizeable contraction in credit supply and that the banking sector maintained ample capital buffers. - Monetary policy: - Supportive of credit growth during 2020-2021 (BCRP rate cuts). - Contractive during the subsequent hiking cycle; contribution of monetary shock close to zero in 2025 as the policy rate approaches its neutral rate. - Terms-of-trade / copper prices: - Boom in copper prices estimated to have a negative contribution to corporate credit during 2023-2025: credit declines in quarters following an increase in copper prices. - High positive correlation observed between copper prices and gross operating surplus of firms, suggesting higher profitability can reduce firms’ need to borrow (self-financing from retained earnings). ### Robustness checks - Historical decomposition for the credit-to-DD ratio yields similar conclusions as for real credit, though with a larger unexplained component for credit-to-DD. - Excluding Reactiva program: - Corporate credit declines sharply at the beginning of the pandemic when Reactiva is excluded, suggesting some substitution to the program. - Post-pandemic period displays additional credit growth when Reactiva is excluded (as Reactiva loans unwind), but main conclusions remain: long-term trend of bank credit behaves similarly and bank credit is still on a cyclical downturn (credit-to-GDP gap of -1pp by end-2025 when Reactiva excluded). SVAR still points to credit demand as the main driver. ### Policy implications and recommendations - Address structural challenges to restart financial deepening: - Target labor informality and low financial literacy. - Promote competition and innovation while maintaining appropriate risk-based regulation, including promoting Open Banking and Finance frameworks. - Promote diversification of funding sources: - Avoid further rounds of AFP withdrawals. - Ease firms’ access to capital markets; note the SMV roadmap of March 2025 as positive. - Maintain a neutral stance on counter-cyclical banking sector policies: - SVAR analysis indicates credit supply shocks made a minor contribution to the cyclical decline. - Authorities should nonetheless revise activation criteria for counter-cyclical policies ahead of potential future upswings in the credit cycle. - Complementary structural policies: - Policies that increase GDP growth—such as addressing insecurity and illegal mining—could boost investment and increase demand for domestic financing. *Source: Annex V. Credit-less Growth? (IMF staff analysis).* ### Annex VI. Implementation of FSAP Recommendations ### Annex VI. Implementation of FSAP Recommendations ### Systemic Risk and Macroprudential Policy - Increase capital surcharges for systemic banks; increase countercyclical provisioning for smaller banks. (SBS) (ST) - New regulations were issued in June 2024 for countercyclical provisions and capital surcharges in line with Basel III framework. - A new methodology was established by the SBS for determining buffers for concentration (single debtor, economic sector, and geographic area). - A more risk sensitive provisioning scheme requires higher countercyclical provisions for SME portfolio. - In March 2022, the General Law was changed to align the composition of regulatory capital to Basel III. - All related regulation was issued in December 2022 and is active as of January 2023. - Systemic risk buffers will be completely phased in 2024 and conservation buffers in 2026. - Enhance the monitoring of off-balance-sheet exposures of banks. (SBS) (IT) - SBS monitors the development of deposit institutions including their off-balance-sheet exposures. - SBS issued in 2023 rules for a standardized report of credit commitments. - Increase foreign currency lending risk weights in line with Basel III guidelines. (SBS) (ST) - An 8-percent increase in capital surcharges is currently applied to exposures subject to unhedged credit risk. - The SBS has introduced a resolution, to take effect in June 2026, standardizing the definition of unhedged credit exposures. - Introduce new risk-monitoring tools; enhance macroprudential mandate and coordination. (BCRP/SBS) (ST/MT) - The growth at risk methodology and a granular risk model for corporate debtors have been incorporated in the stress test model. - BCRP and SBS hold a quarterly meeting for information sharing. - A systemic risk monitoring framework was implemented to timely identify vulnerabilities and systemic risks in the Peruvian financial system, aligning this identification and monitoring process with the recommendations of the International Monetary Fund and the World Bank. ### Financial Sector Oversight — Banks - Amend legal framework to grant SBS powers to exercise full consolidated supervision. (SBS) (MT) - A draft law amendment for holding companies has been prepared. It needs to be approved by Congress. - Enhance financial group supervisory and regulatory approach regarding group governance, consolidated capital adequacy and liquidity risk-management assessment, establishing a lead supervisor, and a supervisory group rating. (SBS) (ST) - The SBS requires and assesses detailed group-wide risk management reports. - These reports were reviewed and governance topics were assessed in on-site inspections during 2025. - SBS is working on modifying the Risk Management Regulations so that the scope also applies to groups. - The SBS requires and assesses capitalization plans when group capital is below the regulatory minimum and assesses liquidity stress tests and contingency plans at group level. - The SBS leads consolidated supervision because the largest supervised firm within a financial group (“lead firm”) is effectively responsible for submitting consolidated information to the SBS. - A methodology for classifying groups is being developed. - Implement requirements for recovery and resolution planning for D-SIBs and financial groups. (SBS) (MT) - The SBS has received the recovery plans from D-SIBs (approved by the Board of Directors) and has conducted a general review of their compliance. - Strategies for implementing the requirement and assessing the recovery plan are still under evaluation. - Requirements for resolution planning are still in progress. - Strengthen legal protection of all SBS staff in line with international best practice. (MEF) (MT) - A draft law amendment including SBS staff legal protection had been prepared. - In 2025, SBS adopted the view that the current legal framework provides an adequate level of legal protection for supervisors. - SBS considers the regulatory framework regarding legal defense could be improved and is evaluating improvements by internal resolutions: (i) including more proceedings, such as arbitration proceedings and police investigations; (ii) clarifying exclusions: legal defense shall not apply in cases of willful misconduct, gross negligence, or when the SBS itself is the plaintiff; and (iii) expanding the scope of coverage: to include third parties involved in companies’ exit schemes and members of the Deposit Insurance Fund. - Strengthen SBS internal governance and control by enhancing Internal Audit Function, including establishment of an Internal Audit Committee. (SBS) (ST/MT) - The functions of the Internal Control, Risk and Compliance Committee at SBS were expanded to include internal risk management, information security, and compliance with regulations. - The Ethics Tribunal was conformed. - A good governance model with appropriate levels of authority, responsibility, accountability and control mechanisms was established and formally approved in 2021. - Finalize review of methodology for calculation of additional capital requirements; enhance activation trigger of countercyclical buffer and systemic and single name risk buffers. (SBS) (ST) - Regulatory changes completed on: (i) regulatory capital requirement for systemic risk, (ii) reduction of the trigger that activates the rule for countercyclical provisioning and capital requirement (from 5 to 4 percent), and (iii) capital requirements for additional risks. - The capital conservation buffer (CCoB) was implemented in 2023, with an adjustment schedule aiming to reach 2.5 percent by December 2026. - A review of the cyclical rule based on the credit-to-GDP gap indicator is in place to better align with international standards. ### Insurance - Implement risk-based supervision for all insurers and brokers. (SBS) (ST) - Risk-based supervision model for insurance companies is applied since 2019-2020. - For insurance brokers, a pilot risk-based supervision model was implemented in 2022, and the final framework was approved in February 2024. ### Cooperatives - Design a deposit-insurance system after passage of law to bring financial cooperatives under supervisory umbrella of SBS. (BCRP, MEF and SBS) (MT) - The regulation for a deposit-insurance system has been approved and the premiums began to be collected. - The insurance started to provide coverage in January 2025 to those cooperatives that have complied with 24 contributions (2 years of premiums). --- ### Annex VII. Update on Peru’s Capacity Development Strategy ### Overview and Institutional Engagement - Peru’s policy frameworks and institutions continue to strengthen thanks to Fund’s CD. - Despite political uncertainties and technical staff turnover, institutional engagement remains strong. - Delivery combines frequent on-the-ground technical assistance (TA) short-term visits and online meetings, along with long-term expert (LTX) engagement. - CD has focused on revenue and customs administration, public financial management, financial technology, cybersecurity, and AML/CFT risks. - Special attention devoted to statistical reporting, updating Peru’s public sector accounting, and addressing climate challenges. - Partner collaboration strong: detailed policy analysis and reform advice provided by the World Bank, the IDB, and the OECD as Peru progresses towards OECD membership. ### Key Areas of Focus for Fund CD - Revenue and Customs Administration - Ample CD activity and funding over the past decade and especially in the post-pandemic period align with authorities’ commitment to fiscal consolidation and tax enforcement. - The 2022-2026 SECO funding program has been instrumental in embedding compliance risk management (CRM) into SUNAT’s daily operations. - Compliance Improvement Plans (CIPs) now address most priority areas, with risk analyses incorporated across various tax types and market segments. - SUNAT is working to publish service standards and its compliance program as part of CRM, while accelerating development of metrics to assess taxpayer satisfaction and trust. - New CD-inspired tools help SUNAT segment importers by size and risk; as a result, less than 10% of shipments are selected for inspection based on risk analysis. - The SECO project will conclude with a TADAT mission in the spring of 2026 to assess CD results. - Public Financial Management (PFM) - FAD continues to provide CD on PFM reforms with more than ten missions over the last decade. - The 2022-2027 SECO project builds on previous SECO-supported PFM projects since 2010. - Recent CD attention areas: (i) strengthening the budget department’s organizational structure; (ii) better integration of the medium-term and annual budgets; (iii) roll-out of a Public Investment Management Assessment (PIMA) mission in 2025, including its climate change module (C-PIMA); (iv) implementation of FAD 2018 Fiscal Governance recommendations; and (v) reinforcing performance budgeting with SDG budgeting and a gender lens. - Support provided on fiscal risk management (subnational governments and PPPs) and assets and liabilities management at the Treasury. - A long-term PFM expert has been deployed in Lima since February 2024. - Tax and Expenditure Policies - CD on tax policy has advised on sustainable and efficient taxation, addressing multiple tax regimes and natural resource extraction. - Recent support on mining tax policy, distribution of mining revenues to subnational governments, taxation of capital gains, and taxation of digital services, which anticipated the extension of the VAT to digital services at end-2024. - Expenditure policy TA focused on pension system analysis, accompanying adoption and implementation of the 2024 pension reform. - An extension to April 2027 of the EP-related SECO funding is currently under evaluation. - Financial Supervision, Central Bank Operations, and Financial Market Development - MCM supported TA to modernize central banking operations and manage financial sector risks. - CD focused on financial technologies, cyber-risk management, and digital payments. - In 2024, a TA mission advised the SBS on developing a comprehensive cybersecurity strategy for the financial sector. - A follow-up mission in 2025 presented findings, provided training on cyber risk supervision, and conducted a cyber crisis simulation exercise. - IMF has provided Technical Assistance to BCRP on CBDC since 2021; the 2025 mission included both CBDC and Fast Payment Systems and covered governance and organizational issues. - At SBS request, IMF conducted in 2025 a targeted desk review of its new organizational structure against international good practices and selected international standards. - Climate Statistics - STA, with SECO support, launched a two-year program in 2023 to strengthen environmental and climate change statistics, focusing on energy and air emissions accounts. - INEI began compiling these accounts with collaboration across government bodies. - Experimental 2019 energy flow and air emissions accounts were released in July 2025, including detailed methodology and indicators. - Subsequent missions supported data validation, dissemination strategies, metadata preparation, and preliminary accounts for 2020-2022. - Final adjustments—particularly on fuel allocation and sectoral consistency—are underway, with full publication of updated accounts and metadata planned for March 2026. - Government Finance Statistics - STA continues CD to strengthen Peru’s GFS and align it with GFSM 2014. - Recent CD focused on completing transactional coverage of general government financing and equity transactions to address above- and below-the-line discrepancies, and on reviewing financial asset and liability positions to develop financial equity time series. - Ongoing efforts aim to provide guidance on recording PPPs, valuing non-produced assets, and quantifying contingencies. ### CD Priorities Going Forward - Near-term Fund CD will continue to support strengthening frameworks and administrative infrastructure across domains. - Revenue administration: focus on CRM, taxpayer trust, development of mining CIPs, and tackling VAT fraud. - PFM assistance: continue in public investment management, fiscal risks, asset and liability operations, mainstreaming climate, and digitization. - Tax and expenditure policy CD: assessment of fiscal regime for mining and smooth functioning of social security systems. - Monetary and financial TA: include a follow-up mission on cyber risks in 2026. - Statistical assistance: continue support for GFSM 2014 and public sector debt statistics (PSDS) compilation, and help develop environmental accounts and macro-relevant climate indicators. *Source: Annex VI and Annex VII, "Implementation of FSAP Recommendations" and "Update on Peru’s Capacity Development Strategy."* ### Annex VIII. Data Issues ### Annex VIII. Data Issues ### Data Adequacy Assessment for Surveillance (As of March 2, 2026) - Overall Data Adequacy Assessment Rating: B - Questionnaire Results — Assessment by sector (Inter-sectoral Median Rating): A B B B B B B - Detailed questionnaire results (Data Quality Characteristics): - Coverage: B B B A B - Granularity: A (top cell for Government Finance Statistics), A (bottom cell for GFS public debt), B B (Monetary and Financial Statistics top cell), B (bottom cell for Financial Soundness indicators) - Consistency: B B B - Frequency and Timeliness: A A A A A - Interpretation of ratings: - A: The data provided to the Fund are adequate for surveillance. - B: The data provided to the Fund have some shortcomings but are broadly adequate for surveillance. - C: The data provided to the Fund have some shortcomings that somewhat hamper surveillance. - D: The data provided to the Fund have serious shortcomings that significantly hamper surveillance. ### Rationale, Changes, and Use of Data - Rationale for staff assessment: - Data provided to the Fund for surveillance are timely, comprehensive, and adequate for macroeconomic and financial analysis. - Coverage, frequency, and timeliness are generally in line with expectations and requirements set in the IMF Data Standards Initiatives. - Improving the granularity and coverage of government finance statistics, public debt statistics, and financial soundness indicators would further strengthen adequacy. - Changes since the last Article IV consultation: - There have been no major changes since the last Article IV Consultation. - Use of data in Article IV consultations: - Staff do not use data and/or estimates different from official statistics. ### Corrective Actions and Capacity Development Priorities - Ongoing and recommended actions: - Reduce public sector statistical discrepancies, improve coverage and granularity, and migrate government finance statistics to the GFSM 2014 Manual. - Continue efforts to harmonize data between the Ministry of Finance and BCRP. - Financial soundness indicators should provide data on Liquidity Coverage Ratio and related indicators (e.g., HQLA) to evaluate regulatory compliance with recently implemented Basel III based rules. - Enhance coordination among agencies that compile official statistics to avoid duplication and enhance consistency across sectors. - Other data gaps identified: - Coverage and timeliness of statistics of the informal sector could be improved. - Foreign exchange intervention (FXI) data is published daily, but could include average maturity of derivative positions. ### Data Standards and Dissemination - Peru subscribes to the Special Data Dissemination Standard (SDDS) since August 1996 and publishes data on its National Summary Data Page. - The latest SDDS Annual Observance Report is available on the Dissemination Standards Bulletin Board. ### Table of Common Indicators Required for Surveillance (As of March 2, 2026) — Selected entries - Publication and data provision timing (selected series, Date of Latest Observation, Date Received, Frequency of Data, Frequency of Reporting, Expected Frequency, Expected Timeliness — entries reproduced as in source): - Exchange Rates: 1/2026; 2/2026; M; M; D; D ... D - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: 1/2026; 2/2026; M; M; M; W; 1W; 1W - Reserve/Base Money: 1/2026; 2/2026; M; M; M; W; 2W; 1W - Broad Money: 1/2026; 2/2026; M; M; M; M; 1M; NLT 3-4W - Central Bank Balance Sheet: 1/2026; 2/2026; M; M; M; W; 2W; 1W - Consolidated Balance Sheet of the Banking System: 1/2026; 2/2026; M; M; M; M; 1M; NLT 3-4W - Banks’ Financial Soundness Indicators: Q3/2025; 1/2026; Q; Q; Q; ...; 1Q; NLT 3-4W - Residential Real Estate Prices: Q3/2025; 12/2025; Q; Q; Q; ...; 1Q; ... - Total Assets of Other Depository Corporations: 1/2026; 2/2026; M; M; M; M; 1M; NLT 3-4W - Total Credit from Other Depository Corporations: 1/2026; 2/2026; M; M; M; M; 1M; NLT 3-4W - Sectoral Breakdown of Credit from Other Depository Corporations: 1/2026; 2/2026; M; M; M; M; 1M; NLT 3-4W - Currency Breakdown (domestic vs. foreign currency) of Other Depository Corporations’ Total Assets and Credit Indicators: 1/2026; 2/2026; M; M; M; M; 1M; NLT 3-4W - Interest Rates: 1/2026; 2/2026; M; M; D; D ...; 1D - Consumer Price Index: 2/2026; 3/2026; M; M; M; M; 1M; 1D - Revenue, Expenditure, Balance and Composition of Financing — General Government: Q4/2025; 2/2026; Q; Q; A; Q; 2Q; 8W - Revenue, Expenditure, Balance and Composition of Financing — Central Government: 1/2026; 2/2026; M; M; M; M; 1M; 4W - Stocks of Central Government and Central Government‑Guaranteed Debt: Q4/2025; 2/2026; Q; Q; Q; Q; 1Q; NLT 8W - Total Stock of General Government Debt: Q4/2025; 2/2026; Q; Q; Q; ...; 4M; ... - External Current Account Balance: Q4/2025; 2/2026; Q; Q; Q; Q; 1Q; 8W - Exports and Imports of Goods and Services: Q4/2025; 2/2026; Q; Q; M; M; 8W; 5- 6W - GDP/GNP: Q4/2025; 2/2026; Q; Q; Q; Q; 1Q; 8W - Gross External Debt: Q4/2025; 2/2026; Q; Q; Q; Q; 1Q; 8W - International Investment Position: Q4/2025; 2/2026; Q; Q; Q; Q; 1Q; 8W - Notes from the table (as reproduced in source): - 1 Includes net market value of derivative positions. - 2 Required only from Members with Systemically Important Financial Sectors. - 3 Other depository corporations include all deposit-taking corporations (except for the central bank) and money market funds. - 4 Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds. - 5 Foreign, domestic bank, and domestic nonbank financing. - 6 The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. - 7 Including currency and maturity composition. - 8 Frequency and timeliness key: (“D”) daily; (“W”) weekly or with a lag of no more than one week after the reference date; (“M”) monthly or with lag of no more than one month after the reference date; (“Q”) quarterly or with lag of no more than one quarter after the reference date; (“A”) annual.; ("SA") semiannual; ("I") irregular; ("NA") not available or not applicable; and ("NLT") not later than. - 9 Encouraged frequency and timeliness under the e-GDDS and required frequency and timeliness under the SDDS and SDDS Plus; flexibility options or transition plans used under the SDDS or SDDS Plus are not reflected. - 10 Based on information from the Summary of Observance for SDDS and SDDS Plus participants, and the Summary of Dissemination Practices for e‑GDDS participants, available from the IMF Dissemination Standards Bulletin Board. ### Authorities’ Statement and Selected Data-Related Observations (Statement by Mr. Óscar A Hendrick and Mr. Alan Ledesma on Peru, May 15, 2026) - Context and data-relevant macro statistics cited by the authorities: - As of 2025: Real GDP grew 3.4 percent; headline inflation was 1.5 percent; the fiscal deficit lowered from 3.5 percent of GDP in 2024 to 2.2 percent of GDP in 2025. - Public debt: 30 percent of GDP. - External position: current account surplus of 3.4 percent of GDP in 2025 and around US$100 billion of international reserves, equivalent to about 29 percent of GDP. - Data and policy implications emphasized: - Authorities stress that strong buffers result from sustained policy discipline and institutional frameworks, not only favorable circumstances. - Authorities agree with staff that maintaining disciplined policies is essential to preserve and strengthen buffers. - Authorities report no use by staff of alternative data/estimates in Article IV consultations. - Specific data-related requests and priorities the authorities value: - Continued Fund technical assistance on revenue reforms, modernization of tax administration (SUNAT), and reducing informality. - Implementation of Basel III-aligned regulations and closing supervisory gaps in line with FSAP recommendations. - Need to avoid further private pension withdrawals to safeguard financial stability and support long-term investment financing. - Integration of climate risks into macroeconomic planning and public investment decisions. - Implementation of the National Artificial Intelligence Strategy 2026–2030, including requirements for public entities to develop AI action plans and ensure compliance with data protection and digital trust frameworks. *Source: Annex VIII. Data Issues (As of March 2, 2026) and accompanying statement by Mr. Óscar A Hendrick and Mr. Alan Ledesma.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1perea2026001.pdf_