Paraguay: 2024 Article IV Consultation, Third Review Under the Policy Coordination Instrument, Modification of Targets, and First Review Under the Arrangement Under the Resilience and Sustainability Facility-Press Release; and Staff Report

© 2024 International Monetary Fund IMF Country Report No. 24/200 PARAGUAY 2024 ARTICLE IV CONSULTATION, THIRD REVIEW UNDER THE POLICY COORDINATION INSTRUMENT, MODIFICATION OF TARGETS, AND FIRST REVIEW UNDER THE ARRANGEMENT UNDER THE RESILIENCE AND SUSTAINABILITY FACILITY —PRESS RELEASE; AND STAFF REPORT In the context of the 2024 Article IV Consultation, Third Review Under the Policy Coordination Instrument, Modification of Targets, and First Review Under the Arrangement Under the Resilience and Sustainability Facility, the following documents have been released and are included in this package: • A Press Release including a statement by the Chair of the Executive Board and summarizing the views of the Executive Board as expressed during its June 26, 2024 consideration of the staff report on issues related to the Article IV Consultation and the IMF arrangement • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 26, 2024, following discussions that ended on May 8, 2024, 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 June 10. • An Informational Annex prepared by the IMF staff. • An Updated World Bank Assessment Letter for the Resilience and Sustainability Facility 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. Copies of this report are available to the public from International Monetary Fund • Publication Services PO Box 92780 • Washington, D.C. 20090 Telephone: (202) 623-7430 • Fax: (202) 623-7201 E-mail: publications@imf.org Web: http://www.imf.org International Monetary Fund Washington, D.C. July 2024 PR 24/246 Paraguay: IMF Executive Board Concludes 2024 Article IV Consultation, Third Review of the Policy Coordination Instrument and First Review under the Resilience and Sustainability Facility FOR IMMEDIATE RELEASE Washington, DC – June 27, 2024: The Executive Board of the International Monetary Fund (IMF) concluded the 2024 Article IV consultation, Third Review under the Policy Coordination Instrument (PCI), modification of targets, and the First Review of the Arrangement under the Resilience and Sustainability Facility (RSF) for Paraguay on June 26, 2024.1,2 In 2023, the economy experienced robust post-drought growth, driven by significant contributions from the agriculture and electricity sectors. Inflationary pressures diminished, with inflation expectations closely aligned with the central bank's 4 percent target. The external current account was in surplus, attributed to solid export performance, while the Guarani maintained relative stability. However, the fiscal outlook worsened, partly due to settlement of previously unrecorded claims suppliers. The economy started this year on a strong footing and risks to the outlook are balanced. The PCI underpins Paraguay's economic strategy and structural objectives of maintaining macroeconomic stability and promoting social welfare and inclusion. The PCI is yielding positive results, though two targets were missed due to the identification of additional unrecorded healthcare-related expenditure. Three reform targets have been met. Some of the reform targets agreed with the previous government are now being reformulated, namely enhancements to the insolvency framework and property cadaster, and actions with respect to the formalization of labor. Under the two-year program under the RSF, the government is committed to enacting a series of adaptation and mitigation measures and to preserve and expand its green energy matrix. Three of the four reform measures were completed and aim at expanding clean electricity generation and protecting forests. The establishment of energy efficiency standards will require a more extensive consultation process with the private sector. Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair of the Board, issued the following statement: “Paraguayan authorities continue to implement policies aimed at maintaining macroeconomic stability that have translated into robust economic growth, low inflation, thriving exports, and a 1 The PCI is available to all IMF members that do not need Fund financial resources at the time of approval. It is designed for countries seeking to demonstrate commitment to a reform agenda or to unlock and coordinate financing from other official creditors or private investors (see Policy Coordination Instrument). 2 The Resilience and Sustainability Facility (RSF) provides affordable long-term financing to countries undertaking reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pa