## IMF Executive Board Concludes Second Review under the Policy Coordination Instrument and Approves Resilience and Sustainability Facility for Paraguay _IMF News, December 19, 2023_ ## Source details **Canonical URL:** [IMF Executive Board Concludes Second Review under the Policy Coordination Instrument and Approves Resilience and Sustainability Facility for Paraguay](https://www.imf.org/en/news/articles/2023/12/19/pr23466-imf-concludes-second-review-under-the-pci-and-approves-rsf-for-paraguay) ## Other formats - [Markdown version](/en/news/articles/2023/12/19/pr23466-imf-concludes-second-review-under-the-pci-and-approves-rsf-for-paraguay/index.md) - [Structured JSON version](/en/news/articles/2023/12/19/pr23466-imf-concludes-second-review-under-the-pci-and-approves-rsf-for-paraguay/index.json) - [Bundle manifest](/en/news/articles/2023/12/19/pr23466-imf-concludes-second-review-under-the-pci-and-approves-rsf-for-paraguay/bundle-manifest.json) ## Bibliographic details - Published: December 19, 2023 --- ### Program approvals and modalities - The Executive Board concluded the Second Review under the Policy Coordination Instrument (PCI) and approved a two-year Resilience and Sustainability Facility (RSF) program for Paraguay. - The two-year program under the RSF allows Paraguay a maximum access of SDR 302.1 million (150 percent of quota). - Paraguay is the first South American country to secure access to the RSF. - The Board granted a request for the extension of the PCI and modification of the end-December 2023 and end-June 2024 targets. - Paraguay’s two-year program under the PCI was approved in November 2022. ### Macroeconomic performance and outlook - 2023: The economy is growing strongly, boosted by agriculture and electricity production. - Inflationary pressures have receded; expectations are well anchored to the central bank’s target of 4 percent. - The external current account: a small surplus is projected on the back of strong exports. - Exchange rate: The guarani has been relatively stable in 2023. - Fiscal position: Has deteriorated somewhat from last year, including a need to register and settle previously unrecorded claims to government suppliers. - 2024 projection: Economic growth is projected to moderate only slightly to 3.8 percent for 2024, while inflation will stay close to the target. - External current account is expected to remain in a small surplus, barring global and weather-related external shocks. - Banking system: Remains stable and profitable, supported by continued sound supervision. ### Fiscal policy and structural reforms - The PCI supports Paraguay’s macroeconomic policies and structural reforms, aiming to ensure macroeconomic and fiscal stability, foster economic growth, and enhance social protection and inclusion. - The PCI program is performing well despite a few targets missed by narrow margins; most reform targets were met. - Some reform agenda aspects were reprogrammed to reflect the new government’s priorities and to allow time to build consensus on long-standing challenges. - The authorities requested a 12-month extension of the PCI. - Authorities plan to gradually reduce the fiscal deficit back towards the 1.5 percent of GDP ceiling under the fiscal rule by 2026 to boost policy credibility. - Policy priorities highlighted for fiscal sustainability: - Rebuild fiscal buffers through implementation of long-standing structural reforms. - Strengthen public sector efficiency as part of a sustainable fiscal strategy. - Ensure sustainability of the public servants’ pension fund. - Improve oversight and governance of public enterprises to reduce fiscal risks. - Streamline social assistance programs through better targeting and efficiency gains. - Combat corruption and limit reputational risks to improve the investment environment. ### RSF climate and resilience commitments - The government is committed to enacting a series of adaptation and mitigation measures and to preserve and expand its green energy matrix. - The authorities requested approval of a two-year program under the RSF with maximum access of SDR 302.1 million (150 percent of quota). - Planned RSF-supported reforms include: - Increasing the resilience of public investments. - Developing a green taxonomy. - Containing climate risks to the financial sector. - Preserving and expanding a clean electricity matrix. - Decarbonizing the economy. - Conserving forests. - Improving waste management. - Timely fulfillment of these commitments, closely coordinated with development partners, will help build the country’s image as a “green” investment destination. ### Key risks and conditionalities - Main risks: adverse climate and external shocks could affect the outlook. - Program performance conditional on timely fulfillment of commitments under the PCI and RSF and coordination with development partners. - The RSF provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness. ### Executive Board statement and recommendations - Mr. Kenji Okamura, Deputy Managing Director and Acting Chair of the Board, noted: - High economic growth, lower than expected inflation, strong export performance, and a stable banking system contributed to a recent re-affirmation of the country’s sovereign rating. - Barring specific events, key economic variables are expected to remain robust in 2024 and beyond. - The new government is committed to continue reforms underpinned by the PCI focused on macroeconomic stability, fostering economic growth, and enhancing social protection. - Recommended focus areas going forward: - Reestablish the fiscal deficit rule by 2026 as the government’s key priority. - Strengthen public sector efficiency. - Ensure sustainability of pension funds. - Improve governance and oversight of public enterprises. - Streamline social assistance for inclusive growth. - Decisive action against corruption to improve the investment environment. - Footnotes embedded in the original release: - The PCI is available to all IMF members that do not need Fund financial resources at the time of approval; it is designed for countries seeking to demonstrate commitment to a reform agenda or to unlock and coordinate financing from other official creditors or private investors. - The Resilience and Sustainability Facility (RSF) provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness. *Press Release No. 23/466 — IMF Communications Department, December 19, 2023* --- ## References - [Paraguay and the IMF](http://www.imf.org/external/country/PRY/index.htm) - [IMF-World Bank Debt Sustainability Framework for Low-Income Countries -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries) - [IMF Quotas -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2022/imf-quotas) - [Special Drawing Rights (SDRs) -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [Policy Coordination Instrument](https://www.imf.org/en/About/Factsheets/Sheets/2023/Policy-Coordination-Instrument-PCI) - [IMF Resilience and Sustainability Trust](https://www.imf.org/en/Topics/Resilience-and-Sustainability-Trust) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2023/12/19/pr23466-imf-concludes-second-review-under-the-pci-and-approves-rsf-for-paraguay_