Paraguay's 6.6% growth masks fiscal crisis that has officials alarmed.

As Santiago Peña's government marks its third year in office, Paraguay is grappling with a tension no official narrative can easily paper over: the economy is expanding at a pace its neighbors would envy, but the state's accounts are deteriorating at a speed that has begun to unsettle both markets and even former officials of the ruling coalition.

The Banco Central del Paraguay reported GDP growth of 6.6% in 2025 — a figure the BCP itself framed in "war economy" terms — and the first quarter of this year delivered a 5.8% expansion. The IMF, which highlighted the country's economic resilience, projects that Paraguay will grow at nearly double the global average. Market participants, according to recent surveys, push that optimism to a range close to 5% for the current year. The soybean complex contributed USD 3.513 billion to the economy through July, exports of industrialized goods rose 35% year-to-date, and remittances from abroad total USD 732 million annually, also fueling the real estate market. Taiwan's foreign minister — the country's only formal diplomatic partner — publicly cited efforts to expand imports of Paraguayan soybeans, reinforcing the geopolitical relevance of that trade flow. Together, this paints a picture of genuine dynamism.

And yet, beneath the surface, the fiscal numbers tell a different story. Public debt rose by USD 1.498 billion in just six months, and interest payments grew 12.9%. Central government payroll spending climbed 9.9% and, as of the end of July, already absorbed 53% of tax revenue. Transfers for salaries and the Caja Fiscal grew by as much as 11.5%. Wages, retirement benefits, pensions, and debt account for nearly 70% of budget rigidity, leaving the state with an extremely narrow margin for maneuver. President Peña himself convened former finance ministers to review the deficit and state debts — a gesture that reveals the severity of the situation more clearly than any official statement. Even more disquieting was the revelation that a USD 280 million debt did not appear on the books of the Ministry of Economy and Finance, according to former minister César Barreto, a disclosure that new minister Óscar Lovera had to manage publicly from his first days in office, urging his predecessor to "read the agreement he signed."

A former deputy economy minister described the current situation as "the worst fiscal management since 2003" and cast doubt on the target of reducing the deficit to 1.5% of GDP by 2028. Writing in ABC Color, an economist struck a more cautious but equally pointed tone: "yellow lights are flashing, and the government must act before a crisis." The MEF, for its part, ruled out new taxes and announced a review of tax exemptions to bolster collection, while pointing to 2028 as the horizon for once again complying with the Fiscal Responsibility Law — a statute that, according to Última Hora, has been observed in only three of the years since it took effect. The government is currently receiving bids from creditors as part of a new bond placement, with the stock of Treasury paper in the local market already around USD 1.2 billion and total bonds issued under Peña surpassing USD 5.4 billion — a figure that has raised concern given the modest returns achieved.

In the energy sector, the debate has reached unprecedented intensity. The recent Law 7599/2025 opened up the electricity market, but former ANDE authorities warn that creating new institutions will not resolve the structural crisis of the system. A legislative proposal goes further, seeking to split ANDE into six companies outright. Meanwhile, the British firm Atome is defending its contract with the state utility, in force since 2022, and has announced a feasibility study for a 300-megawatt peak solar plant — a signal that foreign capital continues to see opportunity in the sector. In parallel, the binational Corpus Christi project — the dam that Paraguay and Argentina are planning with an investment of USD 5 billion — remains one of the great pending energy negotiations of the decade.

On fuels, private stations applied their fourth price adjustment of the year, with diesel increases of up to 39% triggering a domino effect on transport, logistics, and agricultural production costs. Petropar, in this context, announced its entry into the aviation fuel market and plans for five plants across the country, an expansion that will broaden the state company's role in the energy market. Consumer credit, meanwhile, leads the banking portfolio at USD 6.02 billion, while the Central Bank responded to the guaraní's appreciation with reserve purchases and rate cuts.

What defines the coming week is an accumulation of decisions with immediate consequences: Congress must pass the Caja Fiscal reform with amendments, the MEF faces an imminent deadline to submit the 2027 General Budget with a review of every state program, and the Senate has summoned the heads of Public Health and Economy. Minister Lovera will travel to France to meet with international organizations, where the country's fiscal credibility will be, as an economist cited by ABC Color puts it, the variable that determines access to financing on reasonable terms. Paraguay arrives at that meeting with enviable growth — and with public accounts that urgently demand a fiscal narrative markets can believe.

**Ueno (not listed on international exchanges)** — The Paraguayan digital bank reported an 8,000% jump in its stake in "other companies" on its balance sheet, while 64% of its annual earnings are booked under the "projects" category — a profile closer to that of an investment bank than a traditional commercial lender. A trust recorded on its balance sheet at USD 353 million equals almost 100% of its equity, a configuration that has raised questions about the true structure of its exposures.

**Petropar (state-owned, unlisted)** — The Paraguayan state oil company announced its entry into the aviation fuel market and plans for five distribution plants, expanding its direct competition with private operators in a strategically valuable segment with margins higher than those on ground fuel.

**Atome Energy (AIM: ATOM)** — The London AIM-listed British company defended the validity of its contract with ANDE signed in 2022 and announced the start of a feasibility study for a 300-megawatt peak solar plant in Paraguay, which would represent one of the largest renewable energy investments in the country's history.