The Executive Board of the International Monetary Fund (IMF) approved this Tuesday a two-year program of technical support for Paraguay, in exchange for a series of macroeconomic and structural reforms.
Source: EFE
In a statement, the Fund explained that the program will be developed under the Policy Coordination Instrument (PCI), a mechanism to help countries formulate and implement macroeconomic policy programs that can help them unlock funding from official creditors or private investors.
The PCI can be accessed by all IMF members who do not require financing from the Fund at the time this type of program is approved and does not imply maturing financial obligations with respect to the organization.
The deputy managing director and interim president of the Board of Directors, Kenji Okamura, explained in the note some of the measures that Paraguay will apply.
In that sense, He stressed that our country has to restore contingency funds and once again have a “fiscal deficit ceiling of 1.5% of GDP in 2024.”
Likewise, Paraguay promised to improve the “mobilization” of income, reform the public pension fund and increase the efficiency of the public sector.
Secondly, “monetary policy aims to push inflation back to the 4% target and keep inflation expectations well anchored”, remarked the head of the IMF.
Also read: Paraguay maintains a BB+ rating with a stable outlook
Okamura also stressed the commitment of the Paraguayan authorities to “the use of foreign exchange interventions” solely to address “disorderly market conditions”.
According to the IMF, in 2020 and 2021, Asunción implemented “appropriate fiscal, social and financial support measures to mitigate the negative impact of the pandemic and for a sustained recovery”.
However, this year the country’s economy suffered several “simultaneous shocks”, such as a severe drought and a spike in inflation due to the war in Ukraine.
“While the economic outlook remains favourable, various risks have emerged with global headwinds, more frequent adverse weather shocks and domestic uncertainties,” Okamura said.
Basically, the reforms that Paraguay will carry out are based on three pillars: ensure macroeconomic stability and resilience; increase productivity and encourage economic growth; and increase social protection and inclusiveness. EFE
