Paraguay is sinking into an uncontrollable swamp of public debt. According to a recently published report, Paraguay's public debt, rather than being a driving force for national development, has become a shackle hindering growth. The explosive increase in debt over the last decade has now reached a point where it is eroding essential social spending on sectors like healthcare and education.

Public debt, which was just $2.7 billion in 2011, has skyrocketed to $18 billion in 2024, an increase of nearly six times. This rapid surge was not merely due to exceptional circumstances like the COVID-19 pandemic. It was a result of the government's deliberate increase in the issuance of government bonds and foreign borrowing. The problem is that a significant portion of this debt was used to "rollover" existing debt, not for new investments. The opaque use of these resources has failed to contribute to solving the nation's fundamental economic problems.

More serious is the structural vulnerability of the debt. 87% of Paraguay's debt is in foreign currency, mostly US dollars, leaving it fully exposed to exchange rate fluctuations. Furthermore, over half of the debt (51.4%) consists of high-interest bonds, leading to a massive repayment burden.

Paraguay has a chronically weak tax base (11.5% of GDP) and an unstable economic structure reliant on soybean and meat exports. In this situation, debt servicing costs are overwhelming the growth rates of tax revenue and exports. As a result, the nation is trapped in a vicious cycle where it is forced to sacrifice social spending to repay its debt.

This fiscal pressure is directly impacting the lives of its citizens. Reduced investment in essential healthcare and education sectors makes it difficult for citizens to accumulate human capital. This will ultimately undermine the ability of future generations to handle the nation's debt, leading to the entrenchment of poverty and inequality.

Public debt, which should be a tool for growth and development, has instead become a shackle constricting the lives of the people. For Paraguay to break this vicious cycle and build a sustainable future, fundamental economic and fiscal reforms—rather than simply increasing debt—are emerging as an urgent priority.

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