Paraguay’s 2027 Budget Draws Warnings Over Deficit and Rising Debt

Paraguay’s economy is expanding, but economists warn that the country is becoming more vulnerable as its fiscal deficit and dependence on debt increase.

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We grew, but we are more vulnerable than we were 10 years ago.

Former Finance Minister César Barreto and economist Jorge Schneider raised those concerns during a panel on the future of Paraguay’s economy organized by Cerneco. Barreto said Paraguay now faces greater macroeconomic vulnerability than before the pandemic.

"We grew, but we are more vulnerable than we were 10 years ago," Barreto said. He called for a return to fiscal prudence and cautioned against setting growth targets that do not match the economy’s structural conditions. "We do not have the conditions to grow at 7%," he said.

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We do not have the conditions to grow at 7%.

The executive branch presented the 2027 General National Budget to Congress with projections for 4.2% GDP growth, 3.5% inflation and tax revenue 8.6% above the expected 2026 closing figure. The proposed budget totals 166.3 trillion guaraníes, equivalent to $25.7544 billion, and assumes an exchange rate of 6,458 guaraníes per dollar, even though the current rate is below 6,000.

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We are financing current spending with debt, such as the purchase of medicines.

Barreto criticized the growing use of debt to finance ordinary government expenses, including medicine purchases. He said the deficit should be around 2.5% of GDP to preserve a similar level of public investment. Paraguay still has room to correct course, he said, but excessive fiscal expansion could erode the solvency built over previous years. "What was our solvency a few years ago could quickly become a weakness if we do not control this in time," he said.

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What was our solvency a few years ago could quickly become a weakness if we do not control this in time.