The Monetary and Fiscal History of Paraguay, 1960–2017

This chapter characterizes the monetary and fiscal history of Paraguay between 1960 and 2017. The analysis is divided into four periods, which are mainly distinguished by inflation levels, the source of financing of the public-sector deficit, and the central bank legal framework. The four main periods are 1962–1980, when inflation and the deficit were moderate; 1981–1990, a decade characterized by fiscal imbalances and nominal instability; 1991–2003, when the worst financial crisis in the country’s history took place and inflation levels remained moderate nonetheless; and finally, 2004–2017, the period of structural reforms and low inflation. We observe, throughout the periods, that monetary and fiscal policy have maintained a generally conservative stance, that periods of macroeconomic instability have been rare, and that average economic growth has been higher than the average for Latin America. However, despite its progress in terms of convergence, Paraguay remains among the countries with the lowest levels of income per capita in Latin America.