Paraguay has moved to within one notch of investment grade, the top tier international agencies reserve for the safest borrowers. Fitch Ratings affirmed the country’s sovereign credit rating at BB+ with a positive outlook. The agency cited strong economic growth, low public debt and prudent fiscal management.
Its review also set out seven factors that will shape the path to a further upgrade. Two other major agencies, Standard & Poor’s and Moody’s, have already placed Paraguay in investment-grade territory.
Growth, low debt and controlled inflation
The rating keeps Paraguay’s economy under close scrutiny from global investors. Gross domestic product grew by 6.6% in 2025, the fastest pace in Latin America and well above the median for countries rated BB. Fitch expects growth to ease slightly to 4.5% in 2026, supported by a large pipeline of investment projects.
Inflation has also fallen sharply, from 2.4% in May 2026 to 1.5% in August 2026. A 26% appreciation of the guaraní against the US dollar since March 2025 helped ease price pressures. Paraguay’s heavy reliance on hydroelectric power also cushioned the impact of rising global energy costs.
Public debt fell to 31.7% of GDP in 2025, down from 37.5% in 2024, according to Fitch. That remains well below the BB median of 51.6%, reinforcing the agency’s view of Paraguay’s fiscal position as comparatively strong.
BB+ at Fitch, one notch from investment grade
Fitch’s BB+ rating sits one notch below BBB-, the first level of investment grade. Two of the three major rating agencies already rate Paraguay higher. Standard & Poor’s holds the country at BBB- with a stable outlook, while Moody’s rates it Baa3, also stable. Fitch alone keeps Paraguay just outside that threshold, though with a positive outlook that signals room for an upgrade.
The agency separately affirmed Paraguay’s Country Ceiling, a related measure of currency-conversion risk, at BBB-, one notch above the sovereign rating itself. That reflects a low likelihood that Paraguay would restrict access to foreign currency for private companies settling debts abroad.
What stands between Paraguay and an upgrade
Alongside the positive outlook, Fitch’s review listed seven factors it is watching closely. The most immediate concerns around US$1.3 billion in unauthorised state arrears, equivalent to about 2% of GDP. Most of that is owed to pharmaceutical and construction companies. The agency said these arrears, following a similar episode in 2023, have weakened the credibility of fiscal policy.
The government has also pushed back its fiscal deficit target. Convergence toward a 1.5% deficit ceiling, originally planned for 2026, has now been postponed to 2028. New interim targets allow a deficit of 3.2% of GDP in 2026 and 3.9% in 2027, before falling back toward 2% by 2028.
Fitch also flagged rising spending pressures from social programmes and public wages. It said no clear measures are yet in place to consolidate accounts ahead of the next election cycle. The agency further pointed to Paraguay’s narrow tax revenue base and underdeveloped local capital market. On governance, it noted the country ranks in just the 39th percentile of the World Bank’s governance indicators.
The seventh factor concerns uncertainty around large investment projects that underpin Fitch’s growth outlook. The agency specifically named the Paracel pulp mill and Atome’s green hydrogen project. The latter is in a dispute with Paraguay’s state power utility over electricity prices.
The path to an upgrade
Fitch set out what could still lift Paraguay into investment-grade territory. An upgrade would require greater confidence in sustained high growth, progress on large-scale investment projects, and a credible fiscal consolidation plan. The agency also pointed to a wider revenue base, no further arrears, and sustained improvement in governance as conditions for a better rating.
A downgrade, by contrast, would most likely follow a failure to consolidate public finances that pushes debt significantly higher relative to GDP. Fitch also warned that a climate shock, or another disruption, could trigger a negative rating action. That risk applies if growth, fiscal or external indicators are durably weakened.
Paraguayan President Santiago Peña called the ratification “a sign of confidence in a Paraguay that is growing,” in comments on social media. He added that the country continues strengthening its economic fundamentals. The government has set reaching investment grade with all three major agencies as a goal for 2026. With a positive outlook already secured, Fitch is the one still to confirm it.
