Th next president of Paraguay to focus on infrastructure and fiscal deficit

According to Moody’s rating agency, Paraguay’s president-elect, Santiago Peña, will continue with the infrastructure projects left by the outgoing administration while focusing on reducing the fiscal deficit.

Peña will take office on August 15.

“We expect Peña’s administration to keep Paraguay focused on completing ongoing infrastructure projects with the support of multilateral development banks,” Moody’s vice president and senior analyst Samar Maziad told BNamericas.

“Over time, pursuing the economic diversification agenda and attracting greater private investment will be critical to sustaining high investment and economic growth,” she said, adding that this will help improve fiscal metrics.

Former Finance Minister Lea Giménez, who is part of Peña’s transition team, warned last week that the current administration was embarked on a “carnival” of tenders, especially the Ministry of Public Works, MOPC.

“Whether or not we find the box empty will depend on the political will of President [Mario] Abdo, who can quickly solve the issues of the tenders that are going off,” the former minister said, according to local newspaper La Nación.

In response, Public Works Minister Rodolfo Segovia said that no new tenders are planned for this year and that the MOPC is concentrating on projects with auctions already taking place.

BNamericas recently analyzed some infrastructure projects the Peña administration will inherit.

FISCAL DEFICIT

One of Peña’s main campaign promises was to reduce the fiscal deficit without increasing the tax burden, one of the lowest in Latin America at 10.4% of GDP.

Maziad said that the fiscal deficit is anticipated to converge toward the legally established target of 1.5% of GDP by 2024, following a three-year suspension of the fiscal responsibility law during the pandemic, during which the deficit averaged 4.3%.

Deficit reduction will be possible through the gradual elimination of pandemic-related spending and stronger economic growth, as well as reforms that Peña is expected to implement to improve tax collection and reduce economic informality, she said.

Paraguay’s debt-to-GDP ratio was 36% in 2022, lower than other countries with a similar sovereign rating, as well as lower than some of its regional peers, according to Maziad.

“We estimate that debt will increase slightly to 37% of GDP this year and stabilize at that level until 2024,” she anticipated.

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With information from BNamericas

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