Front Matter Page
© 2008 International Monetary Fund
June 2008
IMF Country Report No. 08/179
Paraguay: Fourth Review Under the Stand-By Arrangement and Request for Reduction and Rephasing of Access—Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Paraguay
In the context of the first review under the Stand-By Arrangement and request for reduction and rephrasing of access with Paraguay, the following documents have been released and are included in this package:
The staff report for the First Review Under the Stand-By Arrangement and Request for Reduction and Rephasing of Access, prepared by a staff team of the IMF, following discussions that ended on August 8, 2007, with the officials of Paraguay on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on October 4, 2007. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff statement of October 15, 2007 updating information on recent developments.
A Press Release summarizing the views of the Executive Board as expressed during its October 15, 2007 discussion of the staff report that completed the review.
A statement by the Executive Director for Paraguay.
The document listed below has been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Paraguay*
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
INTERNATIONAL MONETARY FUND
PARAGUAY
Fourth Review Under the Stand-By Arrangement and Request for Reduction and Rephasing of Access
Prepared by the Western Hemisphere Department
(In consultation with other departments)
Approved by José Fajgenbaum and Matthew Fisher
October 4, 2007
Arrangement. The Executive Board approved a 27-month Stand-By Arrangement (SBA) for SDR 65 million (65 percent of quota) on May 31, 2006. The second and third SBA reviews were completed on June 29, 2007. The authorities are requesting to reduce access to SDR 30 million (30 percent of quota), and continue to treat the arrangement as precautionary. The supported program aims at consolidating macroeconomic stability and deepening structural reform to create conditions for higher sustained growth and poverty reduction.
Developments. The program remains on track. All performance criteria and structural benchmarks for end-June 2007 were observed. The staff will update the Board on performance for end-September 2007—where available—ahead of the Board meeting. The economic expansion continues and real GDP growth is expected to rise to 5 percent in 2007. Core inflation in August was 5 percent, consistent with the target for end-2007. The fiscal position remains solid. The external situation was stronger than expected and reserves rose to almost US$2¼ billion at end-August 2007. Implementation of the reform agenda is broadly in line with the program.
Policies. The authorities reiterated their commitment to the program. They continue to resist expenditure pressures, and believe that all program targets for 2007 will be achieved. They presented to Congress the 2008 budget which includes a small overall deficit but is consistent with broad fiscal balance once implemented.
Discussions. These took place from July 25 to August 8, 2007. The mission met with Central Bank President Rojas and members of the Board, Finance Minister Barreto, Industry Minister Ibañez, Education Minister Jimenez, Social Issues Minister Andraschko, Deputy Finance Minister Alarcón, senior government officials, representatives of the banking community, and the private sector. The staff team consisted of A. Santos (head), M. Mlachila, T. Roy, B. Monfort (all WHD), B. Barkbu (PDR), and J. Gasha (MCM). The mission was assisted by L. Durán-Downing, the Fund’s senior resident representative in Asunción, and it liaised with World Bank and IDB staff in Asunción. Mr. Salgueiro (OED) participated in the meetings.
List of Acronyms
| ANDE |
National Electricity Company |
| BCP |
Central Bank of Paraguay |
| BCPEBS |
Basel Core Principles of Effective Banking Supervision |
| BNF |
National Development Bank |
| CADEF |
Ranking of Financial Institutions |
| CAR |
Capital Adequacy Ratio |
| CCT |
Conditional Cash Transfer |
| COPACO |
Public Telephone Company |
| DSA |
Debt Sustainability Analysis |
| ESSAP |
Public Water and Sewage Company |
| FAD |
Fiscal Affairs Department |
| FSAP |
Financial Sector Assessment Program |
| GDP |
Gross Domestic Product |
| GNFS |
Good and Nonfactor Services |
| IDB |
Inter-American Development Bank |
| INC |
National Cement Company |
| INCOOP |
National Institute of Cooperatives |
| IPS |
Social Security System |
| LEG |
Legal Department |
| LOI |
Letter of Intent |
| LRM |
Central Bank Bills |
| MCM |
Monetary and Capital Markets Department |
| MEFP |
Memorandum of Economic and Financial Policies |
| NDA |
Net Domestic Assets |
| NFPS |
Non-Financial Public Sector |
| NIR |
Net International Reserves |
| NPL |
Nonperforming Loans |
| PC |
Performance Criteria |
| PDR |
Policy Development and Review Department |
| PFM |
Public Financial Management |
| PETROPAR |
Public Petroleum Company |
| ROSC |
Report on the Observance of Standards and Codes |
| SAS |
Undersecretary of Social Action |
| SB |
Structural Benchmark |
| SBA |
Stand-By Arrangement |
| SDR |
Special Drawing Rights |
| TMU |
Technical Memorandum of Understanding |
| VAT |
Value Added Tax |
| WB |
World Bank |
| WHD |
Western Hemisphere Department |
Contents
Executive Summary
I. Developments and Performance
II. Outlook and Risks
III. Policy Issues
A. Overview
B. Policy Framework
C. Fiscal Policy
D. Monetary Policy
E. External Sector Policy and Issues
F. Structural Policies
G. Program Issues
IV. Staff Appraisal
Text Boxes
1. Enhancing Regulation and Supervision of the Banking System
2. Strengthening the Central Bank’s (BCP) Balance Sheet
Tables
1. Quantitative Performance Criteria
2. Structural Conditionality
3. Selected Economic and Social Indicators
4. Central Government Operations
5. Consolidated Public Sector Operations
6. Summary Accounts of the Central Bank
7. Summary Accounts of the Banking System
8. Banking System Indicators
9. Balance of Payments
10. Indicators of External Vulnerability
11. Schedule of Reviews and Purchases
12. Medium-Term Scenario
Figures
1. Real Sector Developments
2. Fiscal Developments
3. Monetary Developments
4. Financial System Developments
5. Balance of Payments Developments
Appendix
1. Letter of Intent
2. Fund Relations
3. World Bank Relations
4. Inter-American Development Bank Relations
5. Statistical Issues
6. Work Program
Front Matter Page
October 15, 2007
Front Matter Page
October 15, 2007