Paraguay is growing, and market participants expect inflation near 3%, but the government is running a wider deficit as it boosts public investment. The Central Administration's gap reached 2% of GDP through September 2026, the annualized figure hit 3%, and the official year-end estimate is 3.2%.
The short answer: growth, low inflation and a wider deficit
International coverage has framed Paraguay as a destination for an investment wave. The Economist used that framing, as reported by Estadão on October 10, 2026. The official data published in October add useful nuance: the macro backdrop looks orderly, yet the fiscal side is loosening.
This matters to a remote worker, online founder or investor in three ways:
- It affects what the guaraní may do against your dollar income.
- It affects the cost of running a local operation.
- It affects how much weight to give optimistic headlines.
This article reads the numbers and flags what to watch. It does not predict outcomes.
For the monetary side, see our explainer on the guaraní and BCP monetary policy. Here the focus is fiscal.
What "the investment wave" means and what the data show
The Economist piece, as relayed by Estadão, describes an investment wave sweeping Paraguay. The official figures below speak to one specific part of that picture: public investment, which rose sharply through September 2026. Private capital flows are a separate question, and the official data discussed here do not measure them.
Paraguay's fiscal deficit through September 2026: the numbers
The Ministry of Economy and Finance (MEF) published its Financial Situation Report (Situfin), as reported by La Nación. It shows the Central Administration accumulated a deficit of G. 7.82 trillion (USD 1,257.8 million) through September 2026, equivalent to 2% of GDP. In plain terms, spending exceeded revenue over the period.
| Indicator | Figure | Period | Source | What it means for newcomers |
|---|---|---|---|---|
| Fiscal deficit | USD 1,257.8m / 2% of GDP | Jan–Sep 2026 | MEF Situfin | Spending is outpacing revenue |
| Annualized deficit | 3% of GDP | Annualized | MEF | The full-year pace is higher than the nine-month figure |
| Official year-end deficit estimate | 3.2% of GDP | End-2026 | MEF | The benchmark to compare against |
| Public investment | USD 807.3m, +17.1% | Jan–Sep 2026 | MEF | Infrastructure activity is rising |
| Binational revenues | -17.3% (Itaipú -25.9%, Yacyretá +66.7%) | Jan–Sep 2026 | MEF | A major revenue line is volatile |
| Expected inflation | 3% (2026); 3.5% (2027) | October survey | BCP EVE | Respondents expect low price pressure |
| Expected exchange rate | G. 5,905 (end-2026); G. 6,185 (end-2027) | October survey | BCP EVE | Gradual weakening of the guaraní expected |
| Expected GDP growth | 4.5% (2026); 4% (2027) | October survey | BCP EVE | Continued momentum expected |
| Expected policy rate | 5.50% (end-2026); 5.25% (end-2027) | October survey | BCP EVE | Modest easing expected in 2027 |
| Sovereign rating | Baa3, upgraded July 2024 | Last action noted | Moody's | Investment grade |
Revenues vs spending: 1.6% vs 11.2%
Total government revenues grew just 1.6% year on year through September, while public spending rose 11.2%. That gap explains the pressure on the accounts.
Tax collection did rise 2.4%, driven mainly by domestic taxes. Taxes linked to foreign trade fell, partly because guaraní appreciation reduced the local-currency value of import-related taxes (MEF via La Nación).
Why binational revenues matter: Itaipú down, Yacyretá up
Revenues from the binational entities fell 17.3%. Itaipú royalties and compensation dropped 25.9%, while Yacyretá revenues rose 66.7%. No reason for the Itaipú decline has been reported, so we do not speculate.
The structural point is simple. Itaipú (Paraguay and Brazil) and Yacyretá (Paraguay and Argentina) are binational hydroelectric dams, and Paraguay's electricity generation is practically all hydroelectric. The revenue these dams send to the state is a meaningful and variable line in the budget.
Where the money went: public works and social spending
Public investment reached G. 4.998 trillion (USD 807.3 million), equal to 1.3% of GDP, up 17.1% cumulatively. The Ministry of Public Works (MOPC) led with a 39.4% increase, partly linked to settling overdue payments to contractors.
Spending on strategic sectors grew 13.4%:
- Health: +16.4%
- Security: +14%
- Social programs: +13.9%
- Education: +12.2%
In September, the state also began paying pending obligations to pharmaceutical suppliers through an assignment-of-receivables mechanism. These are to be amortized over 36 monthly installments (MEF via La Nación).
Annualized deficit at 3% and the 3.2% official year-end estimate
The annualized deficit reached 3% of GDP, and the official estimate for the end of 2026 is 3.2%. The difference between 2% (nine months) and 3% (annualized) is a reminder that the headline figure depends on the measurement window. The useful signal is the trajectory: whether the year closes near the official estimate.
Market expectations: inflation, the dollar, growth and rates
The figures below come from the BCP's October 2026 Economic Variables Expectations Survey (EVE), as reported by La Nación. They are medians of what market participants expect. They are not BCP forecasts and not promises.
Inflation: 3% for 2026, 3.5% for 2027
The median expectation for 2026 inflation stayed at 3%. For 2027, the next 12 months and the monetary policy horizon, it is 3.5%. Monthly expectations are 0.2% for October and 0.3% for November.
The guaraní vs the dollar
| Date | Expected guaraníes per US dollar (BCP EVE, median) |
|---|---|
| October 2026 | G. 5,815 |
| November 2026 | G. 5,850 |
| End-2026 | G. 5,905 |
| End-2027 | G. 6,185 |
The October expectation of G. 5,815 sits below the G. 6,000 previously projected for the same month. Respondents have revised toward a stronger guaraní in the near term. The path still implies gradual weakening through end-2027. Treat that as the market's central expectation, not a ceiling or a floor.
GDP growth and the policy rate
Respondents expect GDP growth of 4.5% in 2026 and 4% in 2027. They expect the monetary policy rate (TPM) to stay at 5.50% through October, November and end-2026, then fall to 5.25% by end-2027.
How this fits with investment grade, inflation targeting and a floating currency
Moody's upgraded Paraguay to Baa3, investment grade, in July 2024. The BCP operates an inflation-targeting framework, and the guaraní floats with free movement of capital. For a deeper look at the rating, see our piece on Moody's, the guaraní and real estate.
The link to the fiscal data is direct:
- A floating currency means the guaraní can move in either direction, as the recent appreciation showed.
- That appreciation also reached tax revenue, since import-related taxes were worth less in local currency.
- Credit ratings are periodically reviewed, so a widening deficit is something to follow, neither ignored nor overstated.
Currency planning for newcomers: rent, USD income and company costs
The principle is general: where you can, match the currency of your income to the currency of your obligations, and know where you are exposed. This is not personalized advice.
Living and renting in guaraníes while earning in dollars
Many everyday costs are paid in guaraníes. Before signing a rental, check which currency the contract specifies.
If you earn in dollars and spend in guaraníes, a stronger guaraní reduces your purchasing power and a weaker one raises it. The survey medians point to gradual weakening, but a median is not a guarantee. Keeping a buffer for several months of guaraní expenses is one way to reduce exposure to short-term swings.
Running a company: payroll, suppliers and taxes in PYG
Local payroll, local suppliers and domestic taxes are generally settled in guaraníes. If your revenue is in dollars, your margin carries currency risk. If your revenue is in guaraníes, the risk shifts to imported inputs and any dollar-denominated costs.
Founders setting up local operations often need a documented address in Asunción for the RUC (Paraguay's taxpayer ID) or for bank KYC. Our domicile service provides a 12-month lease agreement on a real apartment in the Eje Corporativo of Asunción, plus a signed certificate of domicile. Each bank or authority decides what it accepts.
Holding savings and investment capital: matching currency to obligations
People holding capital in Paraguay often think in terms of the currency of the liability. Guaraní-denominated costs argue for some guaraní liquidity, while dollar-denominated goals argue for dollar exposure. How you balance this depends on your situation. For allocation questions, licensed professionals we work with offer tailored investment services, quoted individually.
US readers should keep one point in mind: US citizens remain taxed on citizenship regardless of where they invest or live.
If real estate is part of your plan, our guide to buying property in Asunción covers the practical side.
Risks to watch over the next 12 months
- Spending vs revenue growth: spending rose 11.2% against revenue growth of 1.6%. If that persists, the deficit widens further.
- Binational dependence: Itaipú revenue fell 25.9%. Binational income can swing, which makes budgeting harder.
- Guaraní appreciation and trade taxes: a stronger guaraní reduced the local-currency value of import-related taxes. Currency moves feed into revenue.
- The year-end deficit path: the official estimate is 3.2% of GDP. Whether the final figure lands near it is the clearest test of fiscal discipline.
This content is informational and does not constitute legal, tax or investment advice; consult a licensed professional in Paraguay and in your home country.