Paraguay plans to slash multilateral loans for infrastructure investments

Public works are a victim of Paraguay’s proposed 2024 budget as the government aims to reduce the fiscal deficit to 1.5% of GDP in the next few years in line with the country’s fiscal responsibility law. 

The US$15.2bn budget proposal is 6.8% up on this year’s but includes a 29% cut in funding for the public works ministry (MOPC), which would be left with 4.9tn guaraníes (US$672mn), documents submitted to congress show.

The cut is mainly because of a 32% reduction in funding from loans to 3.9tn guaraníes. Funds from the Inter-American Development Bank (IDB), Latin American development bank CAF and OPEC’s international development fund (OFID) are set to fall 72.3%, 68.3% and 51%, respectively. 

“This is because of the limit given to us by the economy ministry, based on the 1.5% fiscal deficit. Evidently that sets criteria to tighten down on loans,” MOPC’s administration and finances undersecretary Marco Elizeche told a legislative committee.  

He added that the economy ministry is working on an amendment that could soften the blow to MOPC’s 2024 funding but that it is still in the early stages. 

Multilateral loans have been MOPC’s main source of financing over the last few years, to the point that the ministry halted tenders earlier this year for projects funded by the treasury, which were already under pressure because of the fiscal deficit. 

Treasury funding for MOPC is set to remain flat in the 2024 budget at 200bn guaranies.

The fiscal rule was suspended for three years due to the COVID-19 pandemic, which led the deficit to peak at 6.1% of GDP in 2020. Last year it reached 3% and is expected to clock in at 4.1% in 2023.

The Santiago Peña administration, which took office in August, wants to lower that to 2.6% next year and reach the 1.5% goal by 2026.

The current bill includes 3.9tn guaraníes for 15 key infrastructure projects that are currently being built and can be seen here (page 7, in Spanish).

Despite the relative lack of new projects, MOPC is studying concessions for routes PY03 and PY06, while minister Claudia Centurión told congress that a US$445mn investment for route PY01 is in the pre-qualification stage.