Peru: Staff Concluding Statement of the 2026 Article IV Mission
IMF News, March 26, 2026
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Bibliographic details
- Published: March 26, 2026
Mission overview and context
- IMF mission led by Ms. Sònia Muñoz conducted Article IV discussions during March 10-25, 2026, in Lima and Cusco.
- Statement published March 26, 2026, summarizes preliminary IMF staff findings and recommendations.
Recent macroeconomic performance
- 2025 growth reached 3.4 percent, bringing activity close to potential.
- Private investment grew 10 percent in 2025, its strongest pace since 2013 excluding the post-pandemic rebound.
- Current account surplus improved to 3.1 percent of GDP in 2025.
- Fiscal deficit narrowed to 2.2 percent of GDP in 2025, meeting the fiscal rule target but described as high in structural terms.
- Record-high terms of trade (TOT) underpinned positive momentum in 2025.
- BCRP continued monetary policy normalization; inflation around midpoint of target band and inflation expectations firmly anchored.
Outlook and projections
- Growth projected at 2.8 percent in 2026 under assumption of limited spillovers from a short-lived war in the Middle East.
- Current account surplus projected at 3.4 percent of GDP in 2026, then gradually returning to a deficit as TOT normalize and private investment grows.
- At current policies, fiscal deficit projected to reach 2 percent of GDP in 2026 and remain above fiscal rule targets in the medium term.
- Public debt expected to stabilize around 32 percent of GDP.
- Monetary policy: BCRP policy rate at 4.25 percent, implying an ex-ante real rate of 2.1 percent as of end-February 2026, slightly above estimated neutral rate of 2 percent.
- Inflation risks: higher energy prices could temporarily raise headline and core inflation towards the upper range of the 1-3 percent target band in 2026.
- Credit growth expected to continue a moderate recovery.
Risks to the outlook
- Balance of risks tilted to the downside due to elevated external uncertainty.
- Key domestic risks: political uncertainty, social unrest, weather-related shocks including a stronger El Niño Costero, persistently high insecurity, and illegal mining.
- External risks: spillovers from a protracted conflict in the Middle East, potential second-round effects on inflation expectations, lower global growth, tighter financial conditions, regional geopolitical tensions, protectionism, trade disruptions, commodity price volatility, and prolonged policy uncertainty.
- Upside: sustained high metal prices or increased post-election political stability could raise private investment and growth.
Fiscal policy and structural fiscal challenges
- Consolidation of about 0.9 percent of GDP by 2028 required at current policies to comply with the medium-term deficit target.
- Key fiscal recommendations:
- Rationalize expenditure to address public spending rigidities and inefficiencies.
- Resist unfunded legislative spending initiatives.
- Slow trends in public employment and wage growth.
- Improve procurement practices and public investment efficiency to maximize growth and social returns.
- Proceed with reforms at Petroperú to improve governance, reduce costs, and ensure financial viability.
- Protect fiscal space for possible prolonged energy price shocks; any fiscal support should be targeted, feature clear sunset clauses, and avoid distorting hydrocarbon prices.
- Revenue-side:
- Revenue reforms essential to durably raise the low tax-to-GDP ratio beyond the current TOT cycle.
- The recent Acuerdo Fiscal is welcome to facilitate public debate around fiscal sustainability and tax base expansion.
Public-private partnerships and contingent liabilities
- Recently enacted PPP frameworks and increased use of PPP/OxI could stimulate investment.
- Authorities should closely monitor accumulation of contingent liabilities and maintain neutrality in investment modality selection.
Pension reform and pensions-related risks
- Implementation of the 2024 pension reform should proceed cautiously until associated risks are mitigated.
- Mandated transition to a notional defined contribution system by 2030 and easier switching between public and private systems may introduce financing shortfall risks for both pension systems over the medium term.
- Pension reform was significantly weakened in September 2025 by approval of the eighth round of AFP withdrawals and removal of exclusion from the minimum pension for affiliates who withdraw entire pension funds.
Monetary policy guidance
- Current broadly neutral monetary policy stance is appropriate; BCRP should continue to allow exchange rate flexibility.
- Monetary policy should remain data dependent amid multiple supply shocks and elevated uncertainty.
- Continued exchange rate flexibility recommended to cushion external shocks.
Financial sector resilience and deepening
- Financial system remains healthy; systemic risks contained per authorities’ stress tests.
- Recommendations to enhance resilience:
- Fully operationalize new regulations and close remaining regulatory gaps.
- Review activation criteria for the counter-cyclical capital buffer.
- Extend recovery plans for systemically important domestic banks to the financial group level and their resolution planning thereafter.
- Structural impediments to financial deepening: high labor informality, low financial literacy, limited usage and access to financial services.
- Credit-to-GDP remains below pre-pandemic levels; cyclical downturn reflects weak demand for credit and abundant liquidity from AFP withdrawals and high mining profits, including from illegal mining.
- Promote competition and innovation (e.g., Open Banking and Finance frameworks).
Private pension withdrawals and capital markets
- Recurrent AFP withdrawals have reduced AFP portfolio yields, due to liquidation of assets at a discount and reallocation toward more liquid assets.
- Withdrawals have weakened the depth and long-term financing capacity of domestic capital markets; AFPs are the largest investor in domestic corporate bonds.
- Recommendation: private pension withdrawals are detrimental to domestic capital markets and should be avoided.
Illegal mining, governance, and social implications
- High metal prices triggered significant expansion of illegal mining of gold and copper and increased incentives for organized crime involvement.
- Regulatory ambiguity in formalization processes has allowed illegal operators to expand.
- Illegal mining risks: discourages formal investment, weakens institutions, extensive socioeconomic repercussions affecting formal labor markets and insecurity.
- Recent legislation expanding definition of illegal mining as a crime to downstream processing activities is welcome.
- Further needed actions:
- Close remaining legal gaps and establish clear pathways to formalization.
- Avoid measures weakening property rights of mining concessions.
- Enhance anti-corruption institutions and state capacity in security, enforcement, and financial supervision through inter-agency, regional, and international cooperation.
- Implement targeted policies to raise living standards and promote economic opportunities in communities with illegal mining activities.
Structural reform priorities to boost investment and potential growth
- Urgent implementation of structural reforms to leverage favorable TOT and lift potential growth.
- Priority reforms include:
- Update fiscal decentralization framework and redesign natural resource revenue-sharing formulas.
- Reform labor and tax regulations that impose excessive costs for formalizing or growing a business.
- Enhance independence and integrity of judicial bodies to end corruption impunity.
- Build resilience to natural disasters.
- Embrace opportunities from digital technologies and artificial intelligence.
- OECD accession process provides a roadmap to boost business climate, reduce informality, and reform the civil service to increase productivity, investments, and public spending efficiency.
Closing
- Staff expressed gratitude to Peruvian authorities and public and private counterparts for hospitality and candid discussions during the mission.
Peru: Staff Concluding Statement of the 2026 Article IV Mission (March 26, 2026).