LatinNews Daily - 7 November 2023

In brief: Paraguay to receive IMF funding to address climate change

*Paraguay’s government led by President Santiago Peña has reached a staff-level agreement with the International Monetary Fund (IMF) on a request for funding for climate change adaptation and mitigation. In a statement, the IMF said that Paraguay has requested funding from its Resilience and Sustainability Facility (PSF) to support “its ambitious climate-centric reforms aimed at reducing the vulnerability to climate change and at achieving a more sustainable growth pathway”. The amount granted is equivalent to 150% of the IMF’s Special Drawing Rights (SDR) 302.1m quota, equating to around US$400m. Meetings between the IMF and Paraguayan authorities from 25 October-3 November also produced an agreement on the policies needed to complete the second review under the IMF’s non-financial Policy Coordination Instrument (PCI), subject to approval by the IMF executive board. Paraguay and the IMF reached a two-year agreement under the PCI in October 2022. The IMF noted that Paraguay is “firmly recovering from the drought last year, with GDP projected to grow by 4.5% in 2023 led by a resurgence in agriculture production and electricity generation”. It added that inflation had fallen in recent months, standing “well below” the central bank (BCP)’s target level of 4%. However, it did note that the 2023 fiscal position will be weaker than originally projected this year “as the new government intends to register and regularise, in the coming months, outstanding claims from private contractors accrued during the [coronavirus (Covid-19)] pandemic”.

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