The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
Paraguay's economy recently experienced particularly large output swings. Economic policies will play a critical role in raising investment by making sure that macroeconomic stability is maintained. The spillovers from the agricultural sector to the rest of the economy are limited. The high level of bank excess reserves in Paraguay reflects a mixture of precautionary and involuntary factors. Large bank excess reserves weaken the monetary transmission channel, and cause inefficiency costs. Bank reforms should be undertaken to preserve financial and macroeconomic stability.