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🇵🇾 Paraguay /Economy & Trade

Paraguay’s 2027 budget relies on GDP growth, drawing criticism over fiscal adjustment

From ABC Color · () Spanish

Translated from Spanish and summarized by DistantNews. Read the original for the full story.

At a glance

Analysis Named sources New plan
  • Paraguay’s proposed 2027 national budget totals 166.3 trillion guaraníes, up 11.2% from the approved 2026 budget, and allows for a deficit of up to 3.9% of GDP.
  • The government forecasts real growth of 4.2% in 2027 and plans to return to the 1.5% fiscal limit in 2028.
  • Economist Arnold Benítez argues that fiscal consolidation should focus more on efficient spending and tax collection, and warns that weaker growth could increase pressure on debt and tax policy.

Paraguay’s proposed 2027 budget again leans on economic growth to improve the country’s public finances, a strategy economist Arnold Benítez says leaves too much weight on an uncertain assumption.

The General National Budget submitted by the executive branch to Congress totals 166.3 trillion guaraníes, or $25.751 billion at an exchange rate of 6,458 guaraníes per dollar. That represents an 11.2% increase from the approved 2026 budget.

I criticize relying more on GDP growth than on spending efficiency or higher revenue. It is already emerging that last year’s growth is questionable, which is truly unfortunate.

· Arnold BenítezThe economist criticized the government’s reliance on growth assumptions in the proposed 2027 budget.

The proposal allows for a deficit of up to 3.9% of GDP, citing accumulated obligations mainly in health and public works. The government plans to return to the 1.5% limit in 2028. It also forecasts real economic growth of 4.2% next year.

Benítez said stronger growth can raise public revenues and increase the size of the GDP used to measure the deficit and debt. That can make the fiscal target easier to meet, he said, but a lower deficit relative to GDP does not by itself prove that the state is spending more effectively.

“With strong growth, higher revenue and better financing conditions, the state should be building room for bad years. Instead, it once again needs a fiscal exception,” Benítez said in an interview with ABC Color. He urged policymakers to test the public accounts against a less favorable scenario, warning that two years of 2% growth could create greater pressure on debt, taxes or the fiscal-convergence target.

With strong growth, higher revenue and better financing conditions, the state should be building room for bad years. Instead, it once again needs a fiscal exception.

· Arnold BenítezHe argued that favorable economic conditions should allow the government to build fiscal room rather than seek another exception.

The economist also challenged the idea that the size of the budget alone measures spending quality. Over the past decade, he said, nominal GDP doubled as revenue, credit, infrastructure and financing capacity increased. Cutting public payrolls is not enough, he argued, because a state can have fewer employees and still function poorly, while retaining staff and offices designed for processes that technology has made obsolete.

Benítez called for reviews of travel allowances, rents, vehicles, fuel, recurring consultancies, bonuses and services. He said the central question should be what results each state structure produces and how much those results cost.

A state can have fewer employees and function poorly. It can also retain staff and offices designed for processes that technology has already made obsolete.

· Arnold BenítezHe said payroll cuts alone cannot measure or ensure the efficiency of public spending.
About this summary

Originally published by ABC Color in Spanish. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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