IMF Executive Board Concludes Fifth Review Under the Policy Coordination Instrument (PCI) and the Third Review Under the Arrangement Under the Resilience and Sustainability Facility of Paraguay

IMF News, June 27, 2025

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Canonical URL: IMF Executive Board Concludes Fifth Review Under the Policy Coordination Instrument (PCI) and the Third Review Under the Arrangement Under the Resilience and Sustainability Facility of Paraguay

The Executive Board completed the fifth review under the Policy Coordination Instrument (PCI) and the third review under the Resilience and Sustainability Facility (RSF).
Completion of the reviews provides the authorities with access to approximately US$ 285 million (SDR 211.46 million) under the RSF, of which the authorities have requested disbursement of US$ 195 million (SDR 146 million).
Program performance under the PCI and RSF is described as “very satisfactory,” supported by a strong commitment to prudent macroeconomic policies and structural reforms.

Real GDP grew 4.2 percent in 2024.
Real GDP is expected to expand 3.8 percent in 2025.
Buoyant private consumption and gross fixed capital formation outweighed a negative contribution from net exports in 2024, with the latter primarily reflecting lower electricity production and exports.
Economic activity continued its strong momentum in early 2025.
Headline inflation remains contained within the central bank’s tolerance range.

The fiscal deficit declined to 2.6 percent of GDP in 2024, down from 4.1 percent in 2023, supported by a substantial increase in tax revenue.
The fiscal deficit is projected to decline to 1.9 percent of GDP in 2025.
The authorities aim to reduce the deficit to 1.5 percent of GDP by 2026—the ceiling established by the Fiscal Responsibility Law.
The statement highlights the need to bolster tax revenues and improve the efficiency of public expenditure to support fiscal consolidation goals.
Addressing the sustainability of the public employees’ pension fund is identified as essential to mitigate medium-term fiscal risks.

The current account deficit widened to 3.7 percent of GDP in 2024, from 0.4 percent in 2023, primarily due to lower export revenues driven by lower soybean prices and a drop in hydroelectricity exports because of low river water levels.
Foreign reserves remain comfortably above standard adequacy metrics.

With inflation contained within the central bank’s tolerance range, monetary policy should remain data driven.
The exchange rate should continue to serve as a shock absorber.
The banking sector is characterized as well capitalized, liquid, and profitable.
Authorities plan to deepen and modernize capital markets.
Further strengthening of AML/CFT frameworks, including by promptly finalizing the National Risk Assessment, is urged.

The outlook is favorable but subject to elevated global risks and to adverse weather shocks.
Staying the course with prudent macroeconomic management is emphasized as a cornerstone of macroeconomic stability.
Recommended policy and reform priorities:
- Continue fiscal consolidation and advance the fiscal consolidation plan.
- Bolster tax revenues and improve public expenditure efficiency.
- Address pension fund sustainability to mitigate medium-term fiscal risks.
- Gradually decrease the proportion of debt denominated in foreign currency to strengthen the public debt risk profile.
- Reduce informality, strengthen governance and anti-corruption frameworks, and enhance resilience to natural disasters.
- Sustain efforts to reform under the Policy Coordination Instrument and the Resilience and Sustainability Facility to improve the business environment and attract investment.

IMF Executive Board press release, June 27, 2025.