Paraguay: Sixth Review Under the Policy Coordination Instrument, and Fourth Review Under the Resilience and Sustainability Facility Arrangement-Press Release; Staff Report; and Staff Supplement

Economic activity remains strong despite global uncertainty. Favorable medium-term growth prospects are underpinned by Paraguay’s macroeconomic stability and the ongoing implementation of comprehensive structural reforms. Inflation remains under control, public debt at prudent levels, and foreign reserves above adequacy benchmarks. Fiscal consolidation is progressing in line with the authorities’ plans and adherence to the Fiscal Responsibility Law is expected to be restored in 2026 for the first time since 2018. Risks to the outlook are balanced: Adverse weather shocks remain a significant downside risk, while higher-than-expected FDI inflows owing to the country’s comparative advantages present upside potential.