Why Did Paraguay’s Government Choose to Rein In the Deficit Now, Rather Than After the Elections?

Paraguay's government has chosen to absorb a large backlog of unpaid bills before leaving office, even though the decision pushes the projected budget deficit to 3.9% of gross domestic product in 2027.

Economy Minister Óscar Lovera said the government received a direct instruction from the president to settle overdue obligations to road construction companies and health-sector suppliers. The unpaid bills total $1.27 billion, including $220 million owed to road contractors and $1.05 billion owed to health providers.

The government could have delayed the adjustment and left the debt to the next administration. Instead, Lovera said the payments will be incorporated into the 2027 General National Budget. The plan calls for Paraguay to return to its legal deficit target of 1.5% of GDP in 2028, the last year of the current administration.

The move gives the fiscal accounts a difficult appearance in the short term, but the economic team describes the increase as temporary rather than evidence of structural loss of control. It also reflects a decision to settle the liabilities before the government leaves office in August 2028.

Lovera also warned that budget figures can be misunderstood when accounting labels are read without their institutional context. He cited a line called “rental of computer equipment,” which might appear to refer to notebooks or office computers. In fact, he said, it covers payments by Paraguay's Superior Court of Electoral Justice for voting machines needed for the country's November 2027 internal elections.

The example shows how a criticism of the budget can rest on a superficial reading of spending categories, without checking the institution responsible or the actual use of the funds. The 2027 budget requires $2.1 billion in financing and includes the debt payments alongside the government's broader fiscal plans.

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rental of computer equipment