Press Release No. 06/171

Press Release: Statement by an IMF Mission to Paraguay

August 1, 2006

Mr. Alejandro Santos, chief of the International Monetary Fund mission to Paraguay, issued the following statement today in Asunción:

"A mission from the International Monetary Fund (IMF) visited Asunción during the last two weeks for discussions in the context of the first review under the Stand-By Arrangement (SBA) approved by the IMF Executive Board on May 31, 2006. The mission met with the President of Paraguay Nicanor Duarte Frutos, Finance Minister Ernst Bergen, Central Bank President Monica Pérez dos Santos, other members of the Cabinet of Ministers, senior government officials, as well as representatives from civil society.

"The main findings of the mission were:

"The authorities' program remains broadly on track. Preliminary data indicate that all performance criteria established for end-June 2006 under the IMF-supported program were observed, with the exception of one criterion that was missed by a small amount. We will confirm this assessment in the coming weeks once firm data becomes available. The structural reform agenda is also being implemented as scheduled.

"Favorable recent developments support attaining macroeconomic objectives for 2006. The economy appears to continue growing at a healthy rate despite a drought and higher international oil prices. Inflationary pressures have been curbed following a tightening in monetary policy and a strengthening of the guaraní. The fiscal outturn has been stronger than anticipated as revenue continue rising and expenditures have been contained. The external position has also strengthened, with international reserves reaching a record high of US$1.5 billion.

"The challenges ahead include continued adherence to the macroeconomic commitments of the program and advancing in the implementation of the structural reform agenda to support growth. Important objectives will be to maintain fiscal discipline, while achieving the program objectives on social spending and public investment, and to continue with efforts to curb inflationary pressures.

"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."