Abstract
IMF Country Report No. 22/177
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IMF Country Report No. 22/177
PARAGUAY
2022 ARTICLE IV CONSULTATION—PRESS RELEASE; AND STAFF REPORT
June 2022
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Paraguay, the following documents have been released and are included in this package:
A Press Release.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on lapse of time basis, following discussions that ended on April 5, 2022, 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 May 27, 2022.
An Informational Annex prepared by the IMF staff.
The documents listed below have been or will be separately released.
Selected Issues
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
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© 2022 International Monetary Fund
Press Release
PR22/217
IMF Executive Board Concludes 2022 Article IV Consultation with Paraguay
FOR IMMEDIATE RELEASE
Washington, DC – June 15, 2022: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Paraguay on June 15, 2022 and endorsed the staff appraisal without a meeting on a lapse-of-time basis.2
After two consecutive years of GDP decline, Paraguay’s economy rebounded in 2021, growing by 4.2 percent thanks to a recovery in the secondary and tertiary sectors and despite contractions in agricultural production and electricity generation. The Covid-19 pandemic currently appears under control and most of the remaining restrictions have recently been lifted. Annual headline inflation started increasing sharply in the second half of 2021 primarily due to higher food and fuel prices, a phenomenon exacerbated by the war in Ukraine, reaching 11.8 percent in April 2022. The Central Bank of Paraguay reacted quickly and has raised its policy rate by a cumulative 650 basis points to 7.25 percent by end-May 2022. The fiscal position has improved since the 2019 and 2020 shocks. After increasing to 6.1 percent of GDP in 2020, the fiscal deficit fell to 3.7 percent of GDP in 2021 partly thanks to the expiration of one-off emergency measures.
The medium-term outlook remains favorable though there are challenges in the near-term. While heatwaves and a severe drought have diminished 2022 GDP growth prospects to 0.3 percent, staff projects a rebound of 4.5 percent in 2023, and 3.5 percent growth over the medium term. End-2022 inflation would be above the central bank’s tolerance corridor of 4 percent +/- 2 percent, at about 8 percent, but is projected to converge back to the authorities’ target by end-2023. The authorities remain committed to their medium-term fiscal target of converging back to the 1.5 percent of GDP deficit limit under the Fiscal Responsibility Law.
Risks to the outlook include fiscal pressures from demands for salary increases and various bills in Congress. Over a longer horizon, Paraguay is vulnerable to climate change and faces risks from changes in precipitation patterns and the frequency and intensity of severe weather events.
Executive Board Assessment
In concluding the 2022 Article IV consultation with Paraguay, Executive Directors endorsed the staff’s appraisal, as follows:
After three years of continuous external shocks, Paraguay faces difficult challenges in 2022 and beyond. Just as the country was recovering from the impact of the Covid-19 pandemic, recent drought and international price shocks have halted the economic expansion. Countercyclical fiscal policies since 2019 mitigated the impact of the shocks, but they also raised public debt and depleted fiscal buffers. The monetary policy stance needs to maintain a tightening bias in the face of global inflationary pressures, while striving to avoid adding to undue strains on the financial system and the economy. Despite the challenges Paraguay is facing in 2022, it is worth noting that the external position in 2021 was stronger than the level implied by fundamentals and desirable policies.
To protect the hard-won fiscal credibility, the commitment to the fiscal rule should be maintained. The government’s goal to return to the FRL’s deficit ceiling remains appropriate, but the transition path appears increasingly rocky in the face of ongoing fiscal pressures during a pre-electoral period. In this context, it would be helpful to codify the return to the deficit ceiling in the updated version of the Fiscal Responsibility Law, which is still awaiting discussion in Congress.
Rebuilding fiscal space is even more important considering Paraguay’s substantial spending needs in critical sectors for long-term inclusive growth. The Covid-19 pandemic has laid bare shortcomings in the public health system, but education is also under-resourced, and investment needs in basic infrastructure and resilience to climate change are large. Eliminating waste and raising public spending efficiency would be part of the response, as well as greater involvement of the private sector, for example through public-private partnerships. However, on their own these policy levers are not likely to generate sufficient resources to cover the gaps.
The government also needs to raise more domestic revenue to address these challenges. Over the medium-term there is room to increase the tax per GDP ratio. Besides continued improvement in tax administration, the authorities should reassess Paraguay’s special tax regimes for specific sectors and activities, and consider another tax reform that goes beyond the improvements enacted in 2020.
Paraguay responded well to the pandemic through quick and novel temporary social assistance programs. The timely delivery and quick implementation of cash transfers through digital and mobile systems prevented a larger spike in poverty, but those programs could have been, with the benefit of hindsight, targeted even better. The lessons learnt and the data collected should be carried over to upgrade the system of beneficiaries of the overall social safety net.
Returning to price stability remains the main objective of the Central Bank, and the BCP is well-equipped to address the challenges and has responded fast and appropriately. However, the underlying price pressures are of a global nature, which will require both a balanced approach and patience. Further adjustments to the monetary policy stance need to remain flexible and data dependent, particularly with regard to inflation drivers and the feedback effects between actual inflation and inflation expectations.
The banking system remains well-capitalized and profitable, and the authorities should continue their efforts to both deepen and widen financial supervision.
Supervisors should continue to follow their work plan to implement risk-based supervision. The supervisory perimeter should be extended to include pension funds and the independence and integrity of the regulatory agency for financial cooperatives should be strengthened. Authorities’ efforts to enhance financial inclusion are welcome and should continue. Paraguay should also continue to follow guidance by the peer evaluation on AML/CFT issues.
Paraguay should step up the implementation of structural reform measures. Governance, business climate, and the efficiency of the public sector would all improve by implementing proposals that have been largely formulated: reforms of public procurement, the civil service, and the structure of the state have matured into legal bills and could be approved and implemented fairly quickly. These would go a long way in reducing corruption risks and unleashing the growth potential of non-traditional sectors of the economy.
Policies to counteract the impact of climate change are being formulated. They should be fully integrated in the planning framework for national development and for the medium-and long-term fiscal budget. Paraguay’s favorable electricity matrix offers opportunities for the transition toward net-zero GHG consumption and production routines. These efforts should be complemented by further investment in the supply of renewable energies and revitalized initiatives to stop deforestation and degradation in the vulnerable habitats of the country.
Paraguay: Selected Economic and Financial Indicators
Includes local currency credit and foreign currency credit valued at a constant exchange rate.
Average annual change; a positive change indicates an appreciation.
Historical GDPs were revised in 2018, including a 30 percent upward revision in nominal GDP for 2017.
Paraguay: Selected Economic and Financial Indicators
| Prel. | Proj. | |||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |||
| (Annual percent change, unless otherwise indicated) | ||||||||||||
| Income and prices | ||||||||||||
| Real GDP | 3.2 | -0.4 | -0.8 | 4.2 | 0.3 | 4.5 | 3.5 | 3.5 | 3.5 | 3.5 | ||
| Nominal GDP | 5.2 | 2.6 | 1.4 | 10.1 | 10.9 | 8.9 | 7.2 | 8.1 | 7.7 | 7.9 | ||
| Per capita GDP (U.S. dollars, thousands) | 5.7 | 5.3 | 4.9 | 5.2 | 5.6 | 5.9 | 6.2 | 6.5 | 6.8 | 7.1 | ||
| Consumption (contribution to real GDP growth) | 3.1 | 1.7 | -1.7 | 4.4 | 2.8 | -4.3 | 0.3 | 2.9 | 2.6 | 2.5 | ||
| Investment (contribution to real GDP growth) | 3.0 | -1.5 | -1.0 | 5.3 | 2.3 | 5.8 | 2.9 | 1.2 | 1.4 | 1.4 | ||
| Net Exports (contribution to real growth) | -2.9 | -0.6 | 1.9 | -5.5 | -4.9 | 3.0 | 0.3 | -0.5 | -0.5 | -0.4 | ||
| Consumer prices (end of period) | 3.2 | 2.8 | 2.2 | 6.8 | 8.0 | 4.2 | 4.0 | 4.0 | 4.0 | 4.0 | ||
| Nominal exchange rate (Guarani per U.S. dollar, eop) | 5,961 | 6,453 | 6,917 | 6,879 | … | … | … | … | … | … | ||
| Monetary sector | ||||||||||||
| Credit to private sector 1/ | 14.1 | 9.7 | 8.1 | 10.5 | 9.4 | 8.6 | 9.0 | 8.9 | 9.0 | 9.0 | ||
| Monetary policy rate, year-end | 5.3 | 4.0 | 0.75 | 5.25 | … | … | … | … | … | … | ||
| External sector | ||||||||||||
| Exports (fob, values) | 2.5 | -7.5 | -9.5 | 22.0 | -11.4 | 18.1 | 3.5 | 4.1 | 3.0 | 3.7 | ||
| Imports (cif, values) | 12.1 | -5.2 | -18.1 | 30.4 | -1.9 | 6.2 | 2.7 | 3.4 | 3.1 | 3.3 | ||
| Terms of trade | -2.1 | -2.7 | -0.5 | -2.6 | 3.8 | -1.7 | -0.5 | 2.1 | 1.0 | 1.4 | ||
| Real effective exchange rate 2/ | 3.3 | -2.9 | -1.2 | 0.3 | … | … | … | … | … | … | ||
| (In percent of GDP, unless otherwise indicated) | ||||||||||||
| External current account | -0.2 | -0.5 | 2.7 | 0.8 | -2.9 | 0.4 | 0.5 | 0.6 | 0.6 | 0.7 | ||
| Trade balance | 1.2 | 0.3 | 3.8 | 1.8 | -1.5 | 1.8 | 2.0 | 2.1 | 2.0 | 2.0 | ||
| Exports | 34.1 | 33.5 | 32.4 | 36.6 | 29.7 | 32.9 | 32.2 | 31.5 | 30.7 | 30.1 | ||
| Of which: Electricity | 5.2 | 4.5 | 4.9 | 4.2 | 3.6 | 3.1 | 2.8 | 2.5 | 2.2 | 1.9 | ||
| Imports | -32.1 | -32.3 | -28.3 | -34.2 | -30.6 | -30.5 | -29.6 | -28.9 | -28.1 | -27.4 | ||
| Of which: Oil imports | -4.1 | -3.8 | -3.0 | -4.0 | -6.9 | -5.1 | -4.3 | -3.9 | -3.6 | -3.5 | ||
| Capital account and financial account | 1.6 | 1.4 | 3.1 | 3.0 | 3.1 | 0.6 | 0.7 | 0.4 | 0.4 | 0.2 | ||
| Of which: Direct investment | 0.4 | 0.6 | 0.3 | 0.3 | 1.2 | 4.0 | 4.4 | 1.4 | 1.0 | 1.0 | ||
| Gross international reserves (in millions of U.S. dollars) | 8,004 | 7,500 | 9,976 | 10,570 | 10,070 | 10,570 | 11,120 | 11,670 | 12,220 | 12,770 | ||
| In months of next-year imports of goods and | ||||||||||||
| services | 7.0 | 8.3 | 8.6 | 8.9 | 8.0 | 8.2 | 8.3 | 8.4 | 8.5 | 8.6 | ||
| Ratio to short-term external debt | 2.2 | 2.1 | 2.4 | 2.4 | 2.3 | 2.4 | 2.6 | 2.7 | 2.9 | 7.3 | ||
| Gross domestic investment | 22.8 | 21.7 | 20.0 | 22.4 | 24.0 | 27.9 | 29.5 | 29.3 | 29.4 | 29.5 | ||
| Gross domestic saving | 22.6 | 21.2 | 22.7 | 23.2 | 21.1 | 28.3 | 29.9 | 29.9 | 30.0 | 30.2 | ||
| Central government revenues | 14.0 | 14.2 | 13.5 | 14.0 | 13.5 | 13.6 | 13.8 | 13.8 | 13.7 | 13.7 | ||
| Of which: Tax revenues | 9.9 | 10.0 | 9.5 | 10.0 | 9.8 | 9.8 | 10.0 | 10.1 | 10.1 | 10.2 | ||
| Central government expenditures | 15.4 | 17.0 | 19.7 | 17.8 | 16.7 | 16.0 | 15.3 | 15.2 | 15.2 | 15.3 | ||
| Of which: Compensation of Employees | 6.6 | 7.0 | 7.3 | 6.8 | 7.0 | 6.7 | 6.5 | 6.5 | 6.3 | 6.1 | ||
| Of which: Net Acquisition of Non Financial | ||||||||||||
| Assets | 2.0 | 2.9 | 3.6 | 3.0 | 2.3 | 1.9 | 1.4 | 1.5 | 1.8 | 2.0 | ||
| Central government net lending/borrowing | -1.4 | -2.9 | -6.1 | -3.7 | -3.2 | -2.3 | -1.5 | -1.4 | -1.5 | -1.5 | ||
| Central government primary balance | -0.7 | -2.0 | -5.1 | -2.6 | -2.6 | -1.9 | -0.9 | 0.0 | 0.1 | 0.0 | ||
| Public sector debt (excl. central bank bills) | 22.3 | 25.8 | 36.9 | 37.7 | 39.5 | 39.0 | 38.7 | 37.9 | 37.2 | 36.5 | ||
| Of which: Foreign currency | 18.1 | 21.4 | 31.9 | 33.0 | 34.1 | 33.7 | 33.3 | 32.5 | 31.9 | 31.1 | ||
| Of which: Domestic currency | 4.2 | 4.4 | 5.0 | 4.7 | 5.3 | 5.3 | 5.4 | 5.3 | 5.3 | 5.4 | ||
| Memorandum items: | ||||||||||||
| GDP (billions of Guaranies) 3/ | 230,576 | 236,567 | 239,915 | 264,103 | 292,829 | 318,781 | 341,889 | 369,614 | 398,138 | 429,456 | ||
| GDP (US$ billions) | 40.2 | 37.9 | 35.4 | 38.3 | … | … | … | … | … | |||
Includes local currency credit and foreign currency credit valued at a constant exchange rate.
Average annual change; a positive change indicates an appreciation.
Historical GDPs were revised in 2018, including a 30 percent upward revision in nominal GDP for 2017.
Paraguay: Selected Economic and Financial Indicators
| Prel. | Proj. | |||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |||
| (Annual percent change, unless otherwise indicated) | ||||||||||||
| Income and prices | ||||||||||||
| Real GDP | 3.2 | -0.4 | -0.8 | 4.2 | 0.3 | 4.5 | 3.5 | 3.5 | 3.5 | 3.5 | ||
| Nominal GDP | 5.2 | 2.6 | 1.4 | 10.1 | 10.9 | 8.9 | 7.2 | 8.1 | 7.7 | 7.9 | ||
| Per capita GDP (U.S. dollars, thousands) | 5.7 | 5.3 | 4.9 | 5.2 | 5.6 | 5.9 | 6.2 | 6.5 | 6.8 | 7.1 | ||
| Consumption (contribution to real GDP growth) | 3.1 | 1.7 | -1.7 | 4.4 | 2.8 | -4.3 | 0.3 | 2.9 | 2.6 | 2.5 | ||
| Investment (contribution to real GDP growth) | 3.0 | -1.5 | -1.0 | 5.3 | 2.3 | 5.8 | 2.9 | 1.2 | 1.4 | 1.4 | ||
| Net Exports (contribution to real growth) | -2.9 | -0.6 | 1.9 | -5.5 | -4.9 | 3.0 | 0.3 | -0.5 | -0.5 | -0.4 | ||
| Consumer prices (end of period) | 3.2 | 2.8 | 2.2 | 6.8 | 8.0 | 4.2 | 4.0 | 4.0 | 4.0 | 4.0 | ||
| Nominal exchange rate (Guarani per U.S. dollar, eop) | 5,961 | 6,453 | 6,917 | 6,879 | … | … | … | … | … | … | ||
| Monetary sector | ||||||||||||
| Credit to private sector 1/ | 14.1 | 9.7 | 8.1 | 10.5 | 9.4 | 8.6 | 9.0 | 8.9 | 9.0 | 9.0 | ||
| Monetary policy rate, year-end | 5.3 | 4.0 | 0.75 | 5.25 | … | … | … | … | … | … | ||
| External sector | ||||||||||||
| Exports (fob, values) | 2.5 | -7.5 | -9.5 | 22.0 | -11.4 | 18.1 | 3.5 | 4.1 | 3.0 | 3.7 | ||
| Imports (cif, values) | 12.1 | -5.2 | -18.1 | 30.4 | -1.9 | 6.2 | 2.7 | 3.4 | 3.1 | 3.3 | ||
| Terms of trade | -2.1 | -2.7 | -0.5 | -2.6 | 3.8 | -1.7 | -0.5 | 2.1 | 1.0 | 1.4 | ||
| Real effective exchange rate 2/ | 3.3 | -2.9 | -1.2 | 0.3 | … | … | … | … | … | … | ||
| (In percent of GDP, unless otherwise indicated) | ||||||||||||
| External current account | -0.2 | -0.5 | 2.7 | 0.8 | -2.9 | 0.4 | 0.5 | 0.6 | 0.6 | 0.7 | ||
| Trade balance | 1.2 | 0.3 | 3.8 | 1.8 | -1.5 | 1.8 | 2.0 | 2.1 | 2.0 | 2.0 | ||
| Exports | 34.1 | 33.5 | 32.4 | 36.6 | 29.7 | 32.9 | 32.2 | 31.5 | 30.7 | 30.1 | ||
| Of which: Electricity | 5.2 | 4.5 | 4.9 | 4.2 | 3.6 | 3.1 | 2.8 | 2.5 | 2.2 | 1.9 | ||
| Imports | -32.1 | -32.3 | -28.3 | -34.2 | -30.6 | -30.5 | -29.6 | -28.9 | -28.1 | -27.4 | ||
| Of which: Oil imports | -4.1 | -3.8 | -3.0 | -4.0 | -6.9 | -5.1 | -4.3 | -3.9 | -3.6 | -3.5 | ||
| Capital account and financial account | 1.6 | 1.4 | 3.1 | 3.0 | 3.1 | 0.6 | 0.7 | 0.4 | 0.4 | 0.2 | ||
| Of which: Direct investment | 0.4 | 0.6 | 0.3 | 0.3 | 1.2 | 4.0 | 4.4 | 1.4 | 1.0 | 1.0 | ||
| Gross international reserves (in millions of U.S. dollars) | 8,004 | 7,500 | 9,976 | 10,570 | 10,070 | 10,570 | 11,120 | 11,670 | 12,220 | 12,770 | ||
| In months of next-year imports of goods and | ||||||||||||
| services | 7.0 | 8.3 | 8.6 | 8.9 | 8.0 | 8.2 | 8.3 | 8.4 | 8.5 | 8.6 | ||
| Ratio to short-term external debt | 2.2 | 2.1 | 2.4 | 2.4 | 2.3 | 2.4 | 2.6 | 2.7 | 2.9 | 7.3 | ||
| Gross domestic investment | 22.8 | 21.7 | 20.0 | 22.4 | 24.0 | 27.9 | 29.5 | 29.3 | 29.4 | 29.5 | ||
| Gross domestic saving | 22.6 | 21.2 | 22.7 | 23.2 | 21.1 | 28.3 | 29.9 | 29.9 | 30.0 | 30.2 | ||
| Central government revenues | 14.0 | 14.2 | 13.5 | 14.0 | 13.5 | 13.6 | 13.8 | 13.8 | 13.7 | 13.7 | ||
| Of which: Tax revenues | 9.9 | 10.0 | 9.5 | 10.0 | 9.8 | 9.8 | 10.0 | 10.1 | 10.1 | 10.2 | ||
| Central government expenditures | 15.4 | 17.0 | 19.7 | 17.8 | 16.7 | 16.0 | 15.3 | 15.2 | 15.2 | 15.3 | ||
| Of which: Compensation of Employees | 6.6 | 7.0 | 7.3 | 6.8 | 7.0 | 6.7 | 6.5 | 6.5 | 6.3 | 6.1 | ||
| Of which: Net Acquisition of Non Financial | ||||||||||||
| Assets | 2.0 | 2.9 | 3.6 | 3.0 | 2.3 | 1.9 | 1.4 | 1.5 | 1.8 | 2.0 | ||
| Central government net lending/borrowing | -1.4 | -2.9 | -6.1 | -3.7 | -3.2 | -2.3 | -1.5 | -1.4 | -1.5 | -1.5 | ||
| Central government primary balance | -0.7 | -2.0 | -5.1 | -2.6 | -2.6 | -1.9 | -0.9 | 0.0 | 0.1 | 0.0 | ||
| Public sector debt (excl. central bank bills) | 22.3 | 25.8 | 36.9 | 37.7 | 39.5 | 39.0 | 38.7 | 37.9 | 37.2 | 36.5 | ||
| Of which: Foreign currency | 18.1 | 21.4 | 31.9 | 33.0 | 34.1 | 33.7 | 33.3 | 32.5 | 31.9 | 31.1 | ||
| Of which: Domestic currency | 4.2 | 4.4 | 5.0 | 4.7 | 5.3 | 5.3 | 5.4 | 5.3 | 5.3 | 5.4 | ||
| Memorandum items: | ||||||||||||
| GDP (billions of Guaranies) 3/ | 230,576 | 236,567 | 239,915 | 264,103 | 292,829 | 318,781 | 341,889 | 369,614 | 398,138 | 429,456 | ||
| GDP (US$ billions) | 40.2 | 37.9 | 35.4 | 38.3 | … | … | … | … | … | |||
Includes local currency credit and foreign currency credit valued at a constant exchange rate.
Average annual change; a positive change indicates an appreciation.
Historical GDPs were revised in 2018, including a 30 percent upward revision in nominal GDP for 2017.
Title page
PARAGUAY
STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION
May 27, 2022
KEY ISSUES
After two consecutive years of GDP decline driven by external shocks, Paraguay’s economy rebounded in 2021. In 2019, drought and flooding reduced economic growth to -0.4 percent. In 2020, the impact of the pandemic on the secondary and tertiary sectors was partly compensated by a rebound of agriculture and an extensive emergency package, and GDP fell by only 0.8 percent. Growth rebounded to 4.2 percent in 2021, but heatwaves and a severe drought decelerated the recovery and have limited 2022 growth prospects, though a recovery is projected for 2023 and the medium-term. While the loss of agricultural export revenue is affecting Paraguay’s balance of payments in 2022, the external position in 2021 was stronger than the level implied by fundamentals and desirable policies.
The confluence of negative shocks has led to a strong rise in inflation. Annual headline inflation started increasing in the second half of 2021, and the recent sharp rise in international fuel and food prices following the war in Ukraine exacerbates inflation risks. The central bank has reacted quickly to the price shock, raising its policy interest rate to a level it considers consistent with the neutral rate. Inflation is projected to converge back to the authorities’ target of 4 percent by end-2023 or early 2024.
The fiscal position has improved since the 2019 and 2020 shocks and is expected to converge to the 1.5 percent of GDP fiscal deficit limit over the medium-term. The fiscal deficit peaked at 6.1 percent of GDP in 2020 following a strong policy response to mitigate the impact of the pandemic. It fell to 3.7 percent of GDP in 2021, and the authorities aim at a gradual consolidation over the next 3 years to help rebuild fiscal buffers. This may require a continued withdrawal of the fiscal stimulus in 2022, while growth is low, but this procyclical fiscal stance will even out over the medium-term as the economy recovers. To achieve that objective, and given large development and333 climate-change adaptation gaps, enhancing domestic revenue mobilization is critical.
The banking system remains stable, but it is important to closely monitor banks’ health following the unwinding of any remaining forbearance measures implemented during the pandemic. Supervision should be strengthened, particularly for cooperatives, insurance companies, and pension funds.
Paraguay needs to step up the implementation of structural reform measures, which have been lagging. The pandemic has laid bare structural deficiencies identified in the past. Health and education reforms are urgently needed as well as continued public investment in transport infrastructure. Governance, business climate, and the efficiency of the public sector need to be strengthened, and corruption risks reduced, to foster economic diversification and productivity growth. The government has prepared a series of reform packages that need to be discussed in Congress and implemented as soon as possible.
Approved By
Patricia Alonso-Gamo (WHD) and Eugenio Cerutti (SPR)
Discussions took place in Asunción during March 23–April 5, 2022. The staff team comprised of Mauricio Villafuerte (head), Tobias Roy, Mauricio Vargas, Manuk Ghazanchyan, Yuanchen Yang (all WHD), Ramon Hurtado (FAD), and Francisco Figueroa (LEG). Jesús Sanchez and Nicolás Landeta (WHD) provided research and administrative assistance. Jorge Corvalan (OED) attended the policy meetings. The team met with Central Bank of Paraguay (BCP) President José Cantero, Minister of Finance Óscar Llamosas, senior officials from the Ministries of Agriculture; Industry and Commerce; and Public Works, and representatives from the private sector, think tanks, and the donor community.
Contents
CONTEXT
RECENT DEVELOPMENTS
OUTLOOK AND RISKS
POLICY DISCUSSIONS
A. Creating Fiscal Space to Ensure Sustainability, Rebuild Buffers, and Tackle Development Needs
B. Monetary and Exchange Rate Policies
C. Financial Sector Policies
D. Structural and Governance Issues
E. Climate Change Policies
STAFF APPRAISAL
FIGURES
1. Recent Developments
2. Fiscal Developments
3. External Sector Developments
4. Monetary Indicators
5. Financial Sector Developments
TABLES
1. Selected Economic and Social Indicators
2. Operations of the Central Government
3. Operations of the Consolidated Public Sector
4. Balance of Payments
5. Summary Accounts of the Central Bank
6. Summary Accounts of the Financial System
7. Indicators of External Vulnerability
8. Medium-Term Outlook
9. Financial Soundness Indicators
ANNEXES
I. Status of Past Article IV Recommendations
II. Risk Assessment Matrix
III. External Sector Assessment and External DSA
IV. Public Sector Debt Sustainability Analysis
V. Expenditure Gaps Toward SDGs
VI. Assessment of Tax Efficiency
VII. Climate Change Impact and Policies
VIII. Digitalization in Paraguay, and the Differential Impact of COVID-19 on Female Employment: Some Insights
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.
