Press Release No. 05/26

The following statement was issued today in Asunción by an International Monetary Fund (IMF) staff mission:

"A mission from the International Monetary Fund (IMF) visited Asunción during February 1-11, 2004 to conduct discussions for the fourth review under the Stand-By Arrangement (SBA). The mission was headed by Mr. Alejandro Santos and met with Finance Minister Borda, Central Bank President González, senior officials, as well as business and legislative representatives. Considerable progress was made towards completing the review and discussions are expected to continue in the following weeks.

"The mission will conduct the final assessment of this review in Washington in coming weeks. Some technical issues on the budget and aspects of the public banking reform agenda are to be resolved.

"The main findings of the mission were: Macroeconomic performance was significantly better than anticipated in 2004. Real GDP grew by almost 3 percent in 2004, the highest in almost a decade. Inflation fell below 3 percent in 2004, one of the lowest in the region, and the lowest in Paraguay in more than two decades. The fiscal accounts were in surplus for the first time in a decade and international reserves are at record highs.

"The program is broadly on track. The majority of the program targets for end-December 2004 were observed. An important target ahead is the approval of the second-tier public banking law by at least one chamber of Congress.

"Progress was made on all elements of the structural reform agenda. In particular, several important banking bills were submitted to Congress, a commission was created to design a restructuring plan for the first-tier public banks, additional external audits for public enterprises were completed, the civil service reform was advanced, and preparations continue to finalize the domestic bond exchange.

"The main challenges for 2005 will be to consolidate the macroeconomic gains of the recent past and to continue implementation of the structural reform agenda. An important objective for 2005 will be to maintain fiscal discipline while paying due regard to social spending. On the structural side, while there are many challenges ahead, efforts should be concentrated on implementing the public banking reform agenda. The agreements reached with civil society in designing a development plan with equity are important steps towards the consolidation of a medium-term policy framework.

"The mission would like to take this opportunity to thank the authorities and the citizens of Paraguay for their hospitality. We would like to encourage the general public to read the IMF documents related to Paraguay's economic program, which can be found at our website: http://www.imf.org/external/country/pry/index.htm."