Paraguay’s proposed 2027 General National Budget (PGN) projects a fiscal deficit of 3.9% of gross domestic product (GDP), but the increase in spending should be absorbed mainly by the settlement of debts and inflexible expenditures, according to former Finance Minister Benigno López. In his view, the plan does not significantly expand the state’s capacity to provide public services.
The Ministry of Economy and Finance says that about two percentage points of the deficit correspond to extraordinary payments on outstanding obligations, particularly in health care. Excluding those arrears, the underlying deficit would be close to 1.9% of GDP. López considers the settlement appropriate but warns that it does not resolve the structural imbalance in the accounts.
The Health Ministry’s budget would grow by 76.9%, but 78% of that increase would go toward paying debts to pharmaceutical companies. “Settling arrears is the right thing to do, but it does not add a doctor or a bed,” he said. In education, the projected nominal increase is 0.5%, below the projected inflation rate of 3.5%, representing a real decline of nearly three percentage points and delaying investment in school infrastructure.
Inflexible expenditures would total 49.7 trillion guaraníes, compared with total spending of 166.3 trillion. In the former minister’s assessment, when inflexible spending grows without a corresponding increase in revenue, the adjustment ultimately falls on investment and suppliers. He also considers a return to the fiscal deficit limit of 1.5% of GDP in 2028 unlikely without efficiency measures, higher revenue or spending cuts, especially because the year will be an election year.
López criticized the annual suspension, through the budget law, of permanent provisions in the Fiscal Responsibility Law. In his view, the mechanism could allow new arrears to accumulate. The tax burden is expected to remain at 11.2%; without improved revenue collection and resource execution, the state could become more dependent on borrowing, reduce investment or delay payments.
The transport subsidy also came under scrutiny. López said that fully financing the policy with debt would mean taxpayers in 2035 paying for travel in 2027. He advocated audited and published ticketing data, payments tied to verifiable standards and a gradual phaseout of the subsidy, rather than a linear 35% increase without guarantees of improved service.
Regarding the Hambre Cero program, the former minister acknowledged the importance of school meals but called for impact assessments and audits of procurement. The concern is that a permanent policy would depend mainly on variable revenue from Itaipu Binational, even after coverage reached 100% in 2026. Regarding pensions for older people, he considered the annual inclusion of 30,000 beneficiaries insufficient in light of growing demand.
In López’s view, the legislature’s budget, estimated at US$119.9 million, has a limited fiscal effect on total spending. The priority, he said, should be to reduce political-appointee positions and strengthen a technical structure capable of overseeing the executive branch. He also questioned the transparency of the G. 4 billion earmarked for the Presidency’s reserved expenditures, although he said he had no evidence of improper use.