Asunción, Paraguay - The Paraguayan Ministry of Economy and Finance (MEF) announced today (the 27th) the resumption of sovereign bond issuance in the domestic market, with the first tender to be held. While the possibility of issuing sovereign bonds through the stock exchange had been open, this issuance will be carried out through the Central Bank of Paraguay (BCP), with a total issuance volume of up to 1,498,662,000,000 guaraníes (PYG), which is approximately 187,802,255 United States dollars (USD) based on the current exchange rate.
According to the announcement by the Ministry of Economy and Finance, two new sovereign bonds with maturities in 2034 and 2037 will be issued. The benchmark interest rates are 8.10% and 8.45% respectively, and coupons will be paid semi-annually.
Resolution No. 187 of the public tender issued by the Ministry of Economy and Finance designates the Central Bank as the agent for the issuance and custody of the sovereign bonds and grants the Vice Minister of Economy and Planning the authority to include modifications within the total approved issuance amount.
According to the issuance schedule, the second sovereign bond issuance is scheduled for Wednesday, June 25th, with additional issuances planned for Wednesday, September 24th, and Wednesday, November 26th.
Recent Overseas Issuance: In February, the Paraguayan Ministry of Economy and Finance issued a total of USD 1.2 billion in sovereign bonds in the New York Stock Market. Of this amount, USD 600 million were US dollar-denominated bonds with a 30-year maturity and a 6.65% interest rate, and the remaining USD 600 million were guaraní-denominated bonds with a 10-year maturity and an 8.5% interest rate. At the time, the Minister of Economy and Finance, Carlos Fernández Valdovinos, stated that more than 160 overseas investors showed interest in purchasing the issued sovereign bonds.
The funds raised through this domestic sovereign bond issuance will be used to finance public works and manage debt as allocated in the 2025 National Budget (PGN).
Outstanding Bond Balance and Future Issuance Plans: Following the overseas issuance, the Paraguayan Ministry of Economy and Finance held an outstanding sovereign bond balance equivalent to USD 235 million for domestic market issuance. After today's first domestic issuance, approximately USD 47 million worth of sovereign bonds are expected to be issued additionally.
Paraguay generally issues guaraní-denominated sovereign bonds in the domestic market. This is part of a strategy to reduce the proportion of foreign currency-denominated debt in public debt in the medium to long term.
Increased Debt Service Burden: According to data from the Paraguayan Ministry of Economy and Finance, public debt service payments on sovereign bonds are expected to increase from this year, reaching high levels of principal and interest payments in 2028.
Interest payments this year are projected to reach 556.719 billion guaraníes, an increase of 15.6% compared to 2024. Furthermore, principal repayments are projected to increase by approximately 86% from 511.570 billion guaraníes in 2023 to 955.887 billion guaraníes in 2025. In 2028, principal repayments are expected to reach 1.66 trillion guaraníes, indicating a continued fiscal burden.
According to the most recent public debt report, as of January 2025, the central government's debt amounted to approximately USD 16.217 billion, of which 50% is comprised of domestic and foreign sovereign bonds.
Overall Analysis: The Paraguayan government appears to be resuming domestic sovereign bond issuance to address increasing fiscal demands and reduce the proportion of foreign currency debt. The size and interest rate levels of this issuance will be important indicators of market response. Considering the future issuance schedule and repayment plans, continuous efforts to ensure the Paraguayan government's fiscal soundness are expected to be required. In particular, the high debt service burden in 2028 could significantly impact the government's fiscal management, making efficient fund management and fiscal policy formulation crucial.
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