Key Points
— The IMF told Peru it needs fiscal consolidation of 0.9% of GDP by 2028 to meet its medium-term deficit target, warning that congressional spending bills without funding are undermining the fiscal framework
— The fund urged reforms at state oil company Petroperú and warned that repeated pension fund withdrawals have “severely weakened” Peru’s capital markets
— Growth is forecast to moderate from 3.4% in 2025 to 2.8% in 2026 as election uncertainty weighs on domestic demand despite strong metal prices
The IMF Peru Article IV consultation delivered a pointed message after a two-week mission that visited the country from March 10 to 25: cut spending, reform Petroperú, raise taxes, and stop raiding pension funds. The Rio Times, the Latin American financial news outlet, reports that the fund’s recommendations arrive at a critical moment — weeks before the April 12 presidential election and in the wake of a congressional spending spree that the country’s own fiscal watchdog called a “hemorrhage.”
The IMF calculated that Peru needs fiscal consolidation equivalent to 0.9 percent of GDP by 2028 to meet its medium-term deficit target. The fund explicitly warned against “unfunded legislative spending initiatives” — a direct reference to the 12 billion soles ($3.45 billion) in pension and salary reforms that Congress recently approved over the objections of the fiscal council and central bank.
The Petroperú Problem
The IMF said reforms at Petroperú must continue to improve governance, reduce costs, and ensure financial viability. The state oil company faces what the government itself has acknowledged is a “structural crisis” of solvency and liquidity, yet authorities have confirmed they will not privatize it. Instead, the government announced last week a $146.3 million injection through external borrowing to restore refining capacity at the Talara, Iquitos, and Conchán facilities.
The company has cycled through four board presidents in five months — a rate of turnover that reflects the political volatility surrounding Peru‘s energy sector. The fund recommended that any fiscal support for Petroperú target the most vulnerable populations, include clear sunset clauses, and avoid distorting hydrocarbon prices.
Pension Withdrawals and Capital Market Damage
One of the fund’s sharpest warnings concerned Peru’s repeated pension fund withdrawals, which have been authorized seven times since the pandemic. The IMF said these withdrawals have “severely weakened the depth and long-term financing capacity of domestic capital markets” because pension administrators — the largest buyers of domestic corporate bonds — were forced to liquidate assets at a discount and shift remaining portfolios toward more liquid instruments.
The fund urged that future withdrawals be avoided entirely and that the 2024 pension reform be implemented cautiously until associated risks are mitigated. It also called tax reform “essential” to close gaps in infrastructure, education, health, and social protection without compromising fiscal sustainability.
The IMF Peru Growth Outlook
The fund acknowledged Peru’s strong 2025 performance — 3.4 percent growth driven by record commodity prices, private investment rising 10 percent (the strongest since 2013 outside pandemic rebounds), and a current account surplus of 3.1 percent of GDP. But it forecast a moderation to 2.8 percent in 2026 as election uncertainty weighs on domestic demand even as high metal prices provide a floor.
The IMF’s overarching message was urgency: Peru should use its favorable terms of trade to implement structural reforms now rather than wait. The fund pointed to the OECD accession process as a roadmap for improving the business climate, reducing informality, and reforming public administration. For a country heading into an election with 35 candidates and no frontrunner above 12 percent, the question is whether any incoming government will have the political capital to act on what the IMF is asking.