IMF Executive Board Concludes 2026 Article IV Consultation with Paraguay

IMF News, August 28, 2026

Source details

Canonical URL: IMF Executive Board Concludes 2026 Article IV Consultation with Paraguay

Paraguay’s economy continues to show remarkable resilience, supported by strong macroeconomic fundamentals and reform efforts.
Sustained structural reform implementation will be key to lifting productivity and ensuring durable and inclusive growth over the medium term.
The Executive Board completed the Article IV Consultation for Paraguay; the authorities consented to publication of the Staff Report prepared for this consultation.

Real GDP:
- Expanded 6.6 percent in 2025.
- Grew 5.8 percent year on year (y-o-y) in 2026 Q1.
- Growth in 2026 is expected to reach 4.4 percent and to moderate to its potential of 3.8 percent over the medium term.
Sector drivers: strong performance of services, manufacturing, agriculture, construction, and energy distribution.
Inflation:
- Headline inflation reached 2.1 percent, y-o-y, in June.
- Headline inflation is projected to reach the central bank’s target of 3.5 percent this year.
External sector:
- Current account deficit declined in 2025 to 2.5 percent of GDP and is expected to reach 2.6 percent in 2026.
- The guaraní appreciated 23.1 percent against the U.S. dollar in nominal terms, y-o-y, and 8.6 percent year to date in June 2026.
- Net international reserves stood at around USD11 billion in end-June; gross reserves are well within adequacy thresholds.

Fiscal deficit:
- Reached 2 percent of GDP in 2025.
- Expected to increase to 3.5 percent of GDP in 2026 owing mainly to the partial clearance of expenditure arrears accumulated over 2023-2025 and weaker revenues owing to the appreciation of the guaraní.
Revenues and collections as of June, 2026:
- Tax revenue grew by 2.1 percent, y-o-y, cumulatively, driven by internal taxes.
- Customs revenue shrunk by 11.5 percent.
- Non-tax revenue declined 11.3 percent y-o-y, owing mainly to the guaraní appreciation.
Policy guidance:
- Fiscal policy should remain anchored on restoring compliance with the Fiscal Responsibility Law (FRL) while protecting essential spending.
- Strengthen public financial management and settle expenditure arrears to preserve fiscal policy credibility.
- Review and strengthen the fiscal framework once consolidation goals have been achieved.

Policy stance:
- The current monetary policy settings are appropriate in the near term.
- There would be scope for gradual further easing of the monetary policy stance if the energy shock proves temporary, inflation expectations remain anchored, and economic activity moderates as projected.
Exchange rate framework:
- Paraguay’s credible inflation-targeting framework and flexible exchange rate have supported macroeconomic stability.
- The exchange rate should continue to play a key role in absorbing external shocks.
- Directors encouraged additional efforts to enhance liquidity and FX management frameworks and to strengthen central bank autonomy and governance.
Monetary indicators:
- Monetary policy rate, year-end (as of July 2026) and other monetary figures are reported in Table 1 of the staff report.

Credit growth and banking sector:
- Overall credit growth moderated after peaking in early 2025 at 22.8 percent.
- Credit growth reached 6.8 percent in December, y-o-y, and 3.2 percent in May 2026.
- Consumer credit still expanded at 22.8 percent.
Banking soundness:
- In May 2026, banks’ liquid assets stood at 24.3 percent of total liabilities.
- Capital adequacy ratios were 14 percent (Tier 1) and 17.3 percent (total regulatory capital), above the minimums of 8 percent and 12 percent, respectively.
Policy guidance:
- Rapid consumer credit growth warrants close monitoring and readiness to act if signs of weaker underwriting standards emerge.
- Develop a macroprudential toolkit, especially borrower-based tools, to contain vulnerabilities.

Directors agreed with the thrust of the staff appraisal and welcomed Paraguay’s continued strong macroeconomic performance, sound policies, and sustained structural reforms.
They noted favorable medium-term growth prospects and balanced risks to the outlook, while underscoring heightened external uncertainty and domestic vulnerabilities.
Key emphases:
- Maintain prudent macroeconomic policies.
- Restore compliance with the Fiscal Responsibility Law (FRL) by 2028.
- Improve tax administration and broaden the tax base; strengthen expenditure efficiency.
- Timely clearance of expenditure arrears and strengthened public financial management to preserve fiscal credibility.
- Data-driven monetary policy and enhanced central bank autonomy and governance.
- Strengthen macroprudential frameworks and AML/CFT measures.

Population 2025 (millions): 6.4
Gini index (2024): 44.2
Unemployment rate (2026Q1): 5.3 (of which, female: 6.2; male: 4.6)
Life expectancy at birth (2024): 74.0
Adult literacy rate (2024): 95.0
Percentage of population below the poverty line (2025): 16.0 (of which, female: 94.0; male:95.0)
Rank in UNDP development index (2022): 102 of 193
GDP per capita (US$, 2025): 7,679
Real GDP growth (selected years): 5.3 (2023); 4.7 (2024); 6.6 (2025); 4.4 (2026); 3.8 (medium term potential)
Consumer prices (end of period): 3.1 (2025); 3.5 (2026 projection)
Nominal exchange rate (LC$/US$, eop) 1/: 7,274 (2023); 7,828 (2024); 6,579 (2025); 6,062 (2026)
Credit to private sector 2/: 10.0 (2023); 17.5 (2024); 7.4 (2025); 6.9 (2026)
Current account balance (percent of GDP): -3.3 (2023); -2.5 (2025); -2.6 (2026)
Gross international reserves (in US$ millions): 9,892 (2023); 9,568 (2024); 10,663 (2025); 10,963 (2026)
Public sector debt (excl. Central Bank bills): 41.0 (2023); 44.6 (2024); 38.2 (2025); 36.7 (2026)
GDP (billions of guaranies): 314,445 (2023); 338,237 (2024); 371,826 (2025); 400,397 (2026)
GDP (US$ billions): 43.1 (2023); 44.7 (2024); 49.3 (2025)

IMF Communications Department. Press Release No. 26/280. August 28, 2026.