Paraguay: 2024 Article IV Consultation, Third Review Under the Policy Coordination Instrument, Modification of Targets, and First Review Under the Arrangement Under the Resilience and Sustainability Facility-Press Release; and Staff Report
IMF Staff Country Reports, July 1, 2024
Source details
- Canonical URL
- Paraguay: 2024 Article IV Consultation, Third Review Under the Policy Coordination Instrument, Modification of Targets, and First Review Under the Arrangement Under the Resilience and Sustainability Facility-Press Release; and Staff Report
Other formats
Bibliographic details
- Published: July 1, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400280030.002
Overview
- Paper presents Paraguay’s 2024 Article IV Consultation, Third Review under the Policy Coordination Instrument (PCI), Modification of Targets, and First Review under the Arrangement under the Resilience and Sustainability Facility (RSF).
- The PCI underpins Paraguay's economic strategy and structural objectives of maintaining macroeconomic stability and promoting social welfare and inclusion.
- Publication date: July 1, 2024.
Key findings and program status
- The PCI is yielding positive results.
- Two targets were missed due to the identification of additional unrecorded healthcare-related expenditure.
- Three reform targets have been met.
- The new government is committed to continuing reforms guided by the PCI and RSF arrangements.
- Paraguay has substantial natural assets and a clean energy matrix that could be leveraged with appropriate policies.
Macro-fiscal priorities and vulnerabilities
- It is crucial for Paraguay to rebuild fiscal buffers.
- Ensuring the sustainability of the public servants’ pension fund is identified as a priority.
- Enhancing supervision of public enterprises is needed to limit contingent risks.
- Taking decisive action against corruption is necessary to minimize reputational risks.
Structural reforms and growth-enhancing measures
- Reducing informality is recommended to broaden the formal tax base and improve labor outcomes.
- Increasing international market integration is recommended to make Paraguay a significantly more attractive investment destination, including for green projects.
- Adaptation and mitigation measures are recommended to reduce the country"’s vulnerability to climate change and preserve natural assets.
Implementation considerations and risks
- Unrecorded healthcare-related expenditure can create fiscal slippages and complicate target monitoring, as illustrated by the two missed targets.
- Contingent liabilities from public enterprises and pension commitments pose medium-term fiscal risks.
- Reputational risks from corruption can materially affect access to international investment and finance.
Policy recommendations (summarized)
- Rebuild fiscal buffers through credible fiscal consolidation and stronger budgetary controls.
- Ensure long-term sustainability of the public servants’ pension fund through reforms and actuarial oversight.
- Strengthen supervision and governance of public enterprises to limit contingent liabilities.
- Implement anti-corruption measures to reduce reputational risk.
- Promote measures to reduce informality and deepen international market integration, including attracting green investment.
- Advance climate adaptation and mitigation policies to preserve natural assets and protect the clean energy matrix.
Source: Paraguay: 2024 Article IV Consultation, Third Review under the Policy Coordination Instrument, Modification of Targets, and First Review under the Arrangement under the Resilience and Sustainability Facility—Press Release; and Staff Report (IMF Staff Country Report, July 1, 2024).
Content in this bundle
- 1pryea2024002-print-pdf