PARAGUAY: IMF awards loan
The IMF announced yesterday, 15 December, that it has signed a credit agreement worth US$73m with Paraguay. The 15-month loan programme is intended to support the Paraguayan government's plan for rescuing the economy.
Asunción was quick to hail the significance of the agreement, which is the first Paraguay has signed with the IMF since 1959. Finance minister Dionisio Borda said the deal will allow the government 'to create the necessary conditions to reactivate private and public investments'. According to central bank president Gabriel González, Paraguay will sign agreements worth US$60m with the World Bank and the Inter-American Development Bank in the next couple of days to help it deal with its external debt obligations. Due to a severe shortage of public funds, Paraguay has had to suspend certain external debt payments.
On the whole, the IMF seems to have been impressed by the economic strategy adopted by Paraguay's President Nicanor Duarte, who came to power in August this year. 'Paraguay has set in motion an ambitious programme to stabilise the economy and implement a structural reform process which will spur growth, reduce poverty, and improve government,' said Fund sub-director Shigemitsu Sugisaki. He also praised the way Duarte had 'sought a broad consensus between the political parties and society for the key elements of his reform programme'.
The credit agreement does come with conditions, however. Paraguay will receive US$44m straight away, but further funds will be dependent on Paraguay keeping international currency reserves of at least US$900m, achieving growth of 2.5% and 3.2% in 2004, and bringing inflation down to single digits next year. Sugisaki called on the government to implement broader fiscal reforms, including raising the rate of income tax and increasing the rate and scope of VAT. He also said that a coherent system for fuel costs was necessary.