Paraguay: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Paraguay
IMF Staff Country Reports, April 30, 2019
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- Paraguay: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Paraguay
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Bibliographic details
- Published: April 30, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498312240.002
Key findings
- The consultation focused on policies to promote long-term growth, widen the tax base, improve public spending efficiency, and strengthen financial sector supervision.
- Poverty declined from 58 percent in 2002 to 26 percent currently.
- Continued convergence is expected to help reduce poverty further and generate revenues to finance large spending needs.
- The banking sector is well-capitalized and stable.
- Casas de credito and casas comerciales require better understanding and supervision.
- The pension system needs reform to:
- prevent large pension deficits in the future, and
- boost the development of the domestic capital market for long-term instruments.
- Authorities concurred with IMF staff’s assessment of the main bottlenecks to long-term economic growth and agreed that structural reforms would help attract more foreign investments and increase the dynamism of the domestic private sector.
Macroeconomic and sectoral issues highlighted
- Fiscal and revenue-side challenges: emphasis on widening the tax base and improving public spending efficiency to finance large spending needs.
- Financial sector supervision: while banks are well-capitalized and stable, nonbank lenders (casas de credito and casas comerciales) need enhanced oversight.
- Pension system vulnerabilities: reforms needed to avoid future large deficits and to support long-term domestic capital market development.
- Poverty and convergence: significant past progress (58 percent in 2002 to 26 percent currently) with expectations of further poverty reduction through continued convergence.
Policy recommendations and authorities' stance
- Implement structural reforms to:
- attract more foreign investment, and
- increase the dynamism of the domestic private sector.
- Strengthen financial sector supervision, with specific attention to casas de credito and casas comerciales.
- Reform the pension system to secure fiscal sustainability and foster long-term financial market development.
- Widen the tax base and improve public spending efficiency to generate revenues for large spending needs.
- The authorities agreed with IMF staff’s diagnosis and supported structural reform priorities.
Source: Paraguay: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Paraguay (April 30, 2019).