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Paraguay fiscal policy and debt management

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2026-09-05 16:18 UTC → 2026-09-05 21:31 UTC · added ~~removed~~

Paraguay is experiencing significant fiscal debate regarding its public debt and budget management. Recent data indicates high budget rigidity, with salaries, pensions, and debt servicing consuming nearly 70% of the Central Administration’s budget. In response to these economic conditions, economist Sergio Sapena has proposed a strategy to increase public debt to approximately 70% of GDP to fund infrastructure and economic growth. The debate has expanded to include conflicting views on taxation and spending. The Unión Industrial Paraguaya (UIP) has formally rejected proposed tax increases, arguing that the fiscal crisis stems from inefficient public spending and a lack of administrative reform. Conversely, economist Luis Rojas contends that the nation suffers from an insufficient tax base, suggesting the expansion of taxes to sectors such as tobacco, income, and grain exports. Advancing these discussions, the Ministry of Economy and Finance (MEF) submitted the 2027 General National Budget (PGN) project to the National Congress. The proposed budget totals approximately USD 25.75 ~~billion,~~ billion (166.3 trillion Guaraníes), an 11.2% increase over 2026, seeking authorization for USD 2 billion in new debt to manage a projected 3.9% fiscal deficit. The official economic forecast within the project anticipates a GDP growth of 4.2%, a nominal GDP of 433.0 trillion Guaraníes, an inflation rate of 3.5%, and an 8.6% increase in tax collection compared to 2026 estimates. However, the 2027 PGN projections have faced intensifying criticism. Economist Manuel Ferreira argues that the government’s projected official exchange rate of 6,458 Guaraníes per dollar is an “accounting artifice” to mask a larger deficit. He suggests that using market rates would reveal a deficit exceeding 4.2% to 4.3% of GDP. Additionally, former Finance Minister César Barreto has warned of fiscal instability, alleging the government has obscured significant debt owed to pharmaceutical and construction firms. ~~Barreto claims this lack of transparency results in a real deficit of approximately 4% of GDP and criticized the plan to issue USD 800 million in bonds to cover recurrent expenses like medicine.~~

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