The risk rating agency Moody's Ratings has maintained Paraguay's Baa3 rating with a stable outlook, confirming the country's investment grade status. However, economists warn that fiscal arrears, rather than the level of public debt, represent the most immediate risk to Paraguay's fiscal credibility.
Economist Arnold Benítez highlighted that the focus of Moody's report is on its observations regarding the management of public finances. The agency estimates that the arrears acknowledged at the beginning of 2026 amount to approximately 2.1% of the Gross Domestic Product (GDP), exposing weaknesses in the coordination between budgeting, cash flow, and spending controls.
According to Benítez, postponing the recognition of these obligations does not eliminate the financial commitment; it merely transfers the cost to the private sector. Provider companies end up financing the state while waiting for payment of invoices already due, a situation that puts pressure on their operations. He argues that if these delays become habitual, the fiscal rule would lose its usefulness, as the official deficit could formally respect the legal limit while a portion of the spending remains off the budgetary records.
In addition to the arrears, Moody's maintains warnings about the limited capacity for generating public revenues, the high proportion of foreign currency-denominated debt, and pressures on the pension system. The country's institutional quality, which is below that of other nations in the Baa category on indicators such as control of corruption and the rule of law, also remains under observation and limits potential improvements in the rating.
The government has already adopted measures in response, such as a plan to settle outstanding obligations, factoring mechanisms, and the reform of the Caja Fiscal (Treasury Fund). However, Benítez assesses that these initiatives need to demonstrate concrete results, as liquidating accumulated debts does not automatically correct the systemic failures that allowed them to arise. The International Monetary Fund (IMF) reached similar conclusions, recommending transparency in incorporating arrears into fiscal statistics and a strengthening of controls over spending execution.
The stable outlook indicates that a downgrade is not the most likely scenario in the short term. However, a new accumulation of arrears, a persistent deterioration of public accounts, or a stalling of reforms could put pressure on Paraguay's sovereign rating in the future.