Paraguay's public debt is growing but remains manageable, says Economy Ministry

Despite a notable increase in public debt over the past decade, Paraguay's Ministry of Economy and Finance (MEF) asserts that the country's financial standing remains manageable. As of June 2026, the ratio of total public debt to Gross Domestic Product (GDP) was recorded at 34.4%.

This figure is significantly lower than the average of 56% of GDP for economies with a 'Baa' rating, according to Moody's, a category to which Paraguay belongs following its achievement of Investment Grade status. The MEF also highlighted that Paraguay's ability to service its debt, measured by the ratio of interest payments to public revenue, is strong when compared to countries with similar credit ratings.

International studies support this assessment. A 2016 IMF study suggested that Paraguay's public finances could remain stable with debt levels between 30% and 45% of GDP. More recently, a 2021 CAF analysis indicated that emerging economies could sustain debt between 25% and 50% of GDP, with Paraguay's specific threshold potentially ranging from 50% to 60% due to its macroeconomic fundamentals and institutional strength.

However, the long-term trend shows a substantial rise in indebtedness. The debt-to-GDP ratio climbed from 8.1% in 2011 to 22.9% in 2019, partly fueled by state-funded investments. The most significant jump occurred in 2020, reaching 33.8% due to increased financing needs amid the pandemic. The ratio has remained above 30% since then, further increasing to 41.1% in 2025 before settling at 34.4% in the first half of 2026. The MEF noted that this recent decrease reflects GDP revisions as much as nominal debt reduction.