Western Hemisphere > Paraguay

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International Monetary Fund. Monetary and Capital Markets Department
At the request of the Central Bank of Paraguay (BCP), a joint technical assistance (TA) mission from the IMF’s Monetary and Capital Markets Department (MCM) and the Legal Department (LEG), provided offsite TA between June 15 and July 8, 2021 on options to enhance the existing resolution framework and the Deposit Guarantee Fund (DGF). The mission engaged in policy discussions with the authorities, building on the recommendations of the Financial System Stability Review that was completed by MCM staff in October 2017. Based on these discussions, it provided several recommendations to strengthen the existing DGF and bank resolution framework, and further buttress the arrangement for crisis preparedness and management.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper investigates the reasons for the growth pickup in Paraguay and explores the potential for sustainable future growth. It shows that the growth acceleration over the past 15 years is the combined result of a few factors: a bounce back from the crisis in the late 1990s and the subpar growth of the two decades prior; a benevolent external environment, the commodity price boom in particular; and the improved macroeconomic stability. Also in terms of its composition, growth in the past has largely been extensive, mostly coming from capital deepening and increasing labor inputs, rather than productivity increase, though total factor productivity growth has played a bigger role in the most recent years. Despite strong growth in recent years, like most of the Latin America, seen over a longer period, Paraguay has not attained significant economic convergence with advanced economies. Empirical data shows a strong linkage between the GDP per capita of a country and its score in a composite structural indicator such as the World Competitiveness Index, which Paraguay ranked poorly on. Identifying and correcting Paraguay’s structural deficiencies that may be hampering productivity growth and capital accumulation will be crucial for sustainable growth.
International Monetary Fund. Western Hemisphere Dept.
This 2017 Article IV Consultation highlights that Paraguay has grown robustly despite a more challenging external environment. The economy gained momentum toward the end of 2016 and expanded by 6.5 percent (year-over-year) during the first quarter of 2017. Real GDP growth is projected to reach 4.2 percent in 2017, reflecting a more moderate pace of activity in the second half of the year. Investment will likely be a crucial driver of growth, as major infrastructure projects are undertaken. Over the medium term, real GDP growth is expected to remain near potential of just below 4 percent. Risks around the outlook are to the downside, especially from heightened political uncertainty in Brazil.
International Monetary Fund
En los últimos años, el FMI ha publicado cada vez más informes y trabajos que abarcan los fenómenos y tendencias en materia económica y financiera en los países miembros. Un equipo de integrantes del personal técnico del FMI elabora cada informe tras celebrar consultas con los funcionarios de los gobiernos; el país miembro puede optar por publicar el informe.
International Monetary Fund
The Paraguayan economy suffered setbacks throughout 2011–12 owing to drought, export ban, and inflation. Recovery measures have been under way with active government intervention in the implementation of a new budget, tax reforms, and new monetary and fiscal policies. The central bank has undertaken measures to increase non-agricultural revenue and strengthen the cooperative sector. Although it commended fiscal prudence, the Executive Board advised on an improved tax regime, promotion of public investment, and the need to devise long-term strategies.
International Monetary Fund
En los últimos años, el FMI ha publicado cada vez más informes y trabajos que abarcan los fenómenos y tendencias en materia económica y financiera en los países miembros. Un equipo de integrantes del personal técnico del FMI elabora cada informe tras celebrar consultas con los funcionarios de los gobiernos; el país miembro puede optar por publicar el informe.
International Monetary Fund
Paraguay weathered the global economic crisis well, supported by an appropriate policy response. The strong rebound of economic growth has given rise to overheating pressures. Policies need to adjust further to ensure a soft landing of the economy. The banking system remains sound, but there is a need to guard it against emerging risks. The monetary policy framework should be strengthened further to support the move to an inflation-targeting (IT) regime. Higher tax revenues are needed to address important deficiencies in infrastructure and basic social services.
International Monetary Fund
The recent tightening of credit conditions in segments of mature financial markets abroad has not had an impact on Paraguay. The current mix of macroeconomic policies combined with favorable external conditions and the appreciation of the guaraní, have facilitated strong program performance and a decline in core inflation over the past months. At the international level, there is a risk that a global slowdown associated with the credit tightening could spill over to emerging economies and to Paraguay’s neighbors, which could affect Paraguayan exports.
International Monetary Fund
The staff paper for the Third Review Under the Stand-By Arrangement on Paraguay focuses on the macroeconomic framework and medium-term scenario, risks, and capacity to repay the IMF. There have been delays in implementing some structural measures, especially related to the approval of banking legislation, owing to a shift in the political environment and congressional delays. Macroeconomic performance has been better than envisaged under the program. The authorities have adopted a new strategy involving a two-stage approach that they believe is politically feasible to achieve but will require more time to implement.
International Monetary Fund
Paraguay’s Fifth Review Under the Stand-By Arrangement and Request for Waiver of Performance Criteria are discussed. The overall fiscal position remains in surplus, the exchange rate weakened slightly with respect to the U.S. dollar, but considerably with respect to the Brazilian real, and international reserves continue to rise. There have been delays in implementing the structural reform agenda. The authorities need to maintain momentum and deepen the structural agenda to reduce vulnerabilities, strengthen institutions, and lay the basis for growth.