Latin Analysis: How Historic is Paraguay’s 2025 Budget?
Hailed as another step forward in building a fairer and more equal Paraguay, the Presupuesto General de la Nación, or 2025 budget, was approved by the legislature in Asunción last week. This has set the tone for Paraguay’s economic policy for next year, representing a firm commitment to inclusive and sustainable development according to national deputy Esteban Samaniego. There has been a clear prioritization of sectors like education, social welfare, healthcare, and national security, with many hoping this will mean a great improvement to quality of life and underfunded services. However, some doubt that the government will remain committed to its promises, as many Paraguayans remain disillusioned by the political system that has been historically mired in corruption.
Despite great suffering during one of the longest-lasting dictatorships in the region under General Alfredo Stroessner, Paraguay achieved a remarkable economic recovery in the last few decades. GDP per capita annual growth rate was -1.8 per cent in 2002, with inflation at 14.6 per cent, and 50 per cent of the population living in poverty. Due to an agreement with the IMF, and significant domestic efforts, Paraguay’s economy stabilized, growing around 3.6 per cent annually between 2003 and 2023. In 2018, it ranked well ahead of its economic powerhouse neighbours in terms of economic freedom, while low taxes and a friendly policy towards foreign investment has also made Paraguay an attractive option for foreign investment. During the second quarter of 2024, GDP per capita annual growth rate was 4.8 per cent, inflation sat at 3.4 per cent in November, and World Bank predictions expected poverty to reduce to 16.8 per cent. However, the healthcare and education systems have been struggling due to a lack of funding and governmental support. Racial inequalities also negatively impact access to already poor public services in Paraguay, with 66 per cent of Indigenous people living in poverty, and only averaging around three years of schooling.
Paraguay's GDP in current prices from 1990 to 2025
Accounting for around ₲133 trillion (Paraguayan guarani) or $18 billion, the new budget has increased funding for so-called ‘strategic sectors’, with around 77 per cent of the budget focusing on public works, healthcare, education, social-welfare provision, and national security. This is equivalent to around ₲12.8 trillion, or $1.64 billion. ₲886 billion ($113.5 million) has been committed to strengthening the health service. In a healthcare system “characterized by segmented provision and low public spending”, an increase of around $103 million to healthcare budgets compared to 2024 is a welcome and necessary development, especially given Paraguay “ranks close to last in the region for investment in health”. This has had widespread consequences, given that majority of citizens are not insured and rely on public health services. For example, around 40 per cent of the population have admitted that they have never received the free medication that they are eligible for from the state.
Special emphasis has been put on increased funding for Paraguay’s National Cancer Institute, a crucial development in a country that has struggled to provide timely diagnoses and treatment to cancer sufferers due to “[l]imited equipment and a lack of trained personnel”. This combined with recent efforts and support from international agencies hopes to greatly improve the quality of cancer care provided.
Paraguay’s education system has been allocated a historic budget for 2025, worth around ₲9.7 trillion, or $1.24 billion. The plan is to funnel this extra income into raising salaries and providing school resources to more than 1.37 million students. There appears to be an acute need for a boost in revenue for the education sector – with this budget experiencing cuts of around 11.4 per cent in 2020 and 2021. This significant increase in funds compared to the ₲8.8 trillion promised for 2024 hopes to improve education, given that Paraguay’s education system ranks as one of the poorest in Latin America, despite its relative economic prosperity. Around 20 per cent of 5-year-old children and 234,000 children between 13-17 years old were out of school in 2021. Additionally, higher education will also receive more support, with national universities to expect an increase of ₲266 billion in their funding ($34 million). This is a big step in tertiary education provision in Paraguay, given that their universities do “not enjoy widespread recognition”, forcing many young people to study abroad.
The Hambre Cero – Zero Hunger in Schools - program was introduced this year to ensure that all young people were receiving food during the school day. This new initiative has received further funding in the 2025 budget, with ₲2.3 trillion ($294.6 million) committed to ensuring the program reaches all children of school age in all areas of the country. Before this initiative was introduced, only around 5 per cent of children were being fed at school. Programs supporting the elderly and increasing access to pensions have also been included in this new budget, spelling good news for older Paraguayans. According to President Peña, no other budget has ever invested so much into social programs as this one, coining it as historic in its protection of the most vulnerable.
A focus on strengthening national security is another important aspect of the 2025 budget. ₲575 billion ($73.6 million) has been promised to Paraguay’s Homeland Security, which will facilitate 5,000 new police officers joining the LINCE police unit – a mobile group that prevent crimes and provide immediately responses to issues through motorcycle patrols.
Regarding economic growth, Finance Minister Fernández Valdovinos has vowed that this budget is secure and sustainable, especially given that a 7.5 per cent increase in tax revenues will provide $870 million extra to fund the extensive public spending campaign. He also reassured that the administration is not wavering in its its “commitment to the 2025 Fiscal Convergence Plan, maintaining a deficit limit of 1.9% of GDP.” It is expected that GDP will grow by around 5 per cent next year, the fiscal deficit will be reduced, and inflation should stay around 4 per cent. The IMF has responded positively to this budget, confident that it supports Paraguay's efforts to reduce its deficits.
However, concerns have been voiced by the public regarding some aspects of the budget and its implementation. One of the most controversial provisions of the 2025 budget has been a salary increase for legislators of ₲6.2 million each, while the finance minister requested that subsidies for disabled people not be included. Workers in other sectors had unsuccessfully requested pay increases from the government, and many see this decision as politicians making their own interests a national priority.
The public are also worried about the implementation of the budget, given that Paraguay ranks poorly in terms of corruption. In 2023, the country was given a score of 28/100 in the Corruption Perceptions Index, ranking 136th out of 180 countries for transparency. Also, despite Paraguay’s public debt having fallen dramatically between 1990-2011 with the country’s debt below the Latin America average, it is on the rise again. Some worry that such an extensive public spending campaign as this one may worsen this and undo the economic restructuring and recovery that has taken place since the fall of the dictatorship in 1989. However, many economists are positive that this budget has well-placed Paraguay to attract more foreign investment, which will support the economy’s growth.
As one of the faster growing economies in Latin America, the future holds great promise for Paraguay. However, public services need investment and attention to improve the quality of life of the population. Many see the 2025 budget as the first step in achieving this. There does seem to be a lack of focus on how to make sure increased funding will help all sectors of Paraguay’s population, especially the chronically underserved Indigenous people. A truly ‘historic’ budget would put these communities at the heart of government efforts and end persistent marginalization and lack of access for native people.
