Guatemala City: An International Monetary Fund (IMF) mission led by Mr. Alex Culiuc visited Guatemala City during May 27 – June 5, 2026 for the 2026 Article IV consultation. At the end of the visit, the mission issued the following statement:
Resilience under headwinds and uncertainty
Guatemala continues enjoying strong macroeconomic fundamentals. Driven by robust private consumption and a positive fiscal impulse, 2025 real GDP grew 4.3 percent, above expectations. At 1.7 percent, end-2025 inflation was well below the central bank’s target. The current account surplus widened to 4.7 percent of GDP and international reserves increased to US$32.7 billion, both reflecting record-high remittances. Banguat has kept its policy rate unchanged at 3.5 percent since February 2026 amid uncertainty surrounding commodity prices. The overall 2025 fiscal deficit increased to 1.9 percent of GDP, but short of the budgeted 3.8 percent, mainly on account of modest capital spending execution. Guatemala retains favorable market access, with central government debt at 27 percent of GDP.
The oil price shock is disrupting what started as a very strong year. The 4.4 percent expansion in Q1 economic activity pointed to a solid 2026. However, the mission forecasts—under highly uncertain oil price projections—that the effects of the War in the Middle East will moderate growth to 3¾ percent this year. Beyond 2026, growth is expected to rebound as the oil shock dissipates and higher public investment and reforms begin to yield returns. Anchored inflation expectations give confidence that end-2026 headline inflation should remain—barring severe shocks—within Banguat’s 4±1 percent target band. The fiscal deficit is projected to undershoot the budgeted 3.6 percent of GDP in 2026, and—under staff’s revenue projections—stabilize around 2½ percent of GDP in the medium term. The current account surplus will narrow as remittances growth moderates and private investment strengthens.
The balance of risks is tilted to the downside. External risks include prolonged high energy prices, and changes affecting migration and remittances. On the upside, oil prices could come down faster, and the Guatemala-U.S. trade agreement could anchor bilateral relationships in the face of evolving U.S. trade policy. Domestically, implementation constraints and likely pre-electoral pressures are balanced by the timely appointments to key judicial positions, which could reduce drag on reforms and boost investor confidence. A severe El Niño is a considerable near-term risk.
Raising infrastructure investment
The authorities’ ambitious infrastructure agenda holds the promise to unlock higher private investment and growth and, thereby, contribute to external rebalancing. The strategy—combining a temporary increase in capex, higher transfers to departmental development councils (CODEDEs), government-to-government contracts (starting with the U.S. Army Corps of Engineers), and multiple legislative reforms—would benefit from:
- Reducing bottlenecks and improving project preparation and execution by implementing outstanding recommendations in the 2023 Public Investment Management Assessment.
- Streamlining public procurement. The draft Public Procurement law holds the promise of eliminating red tape while maintaining adequate safeguards and ensuring transparency.
- Resolving the impasse over the operationalization of the priority infrastructure law. Should this involve legal amendments, they should also ensure that the funding structure of the Directorate for Priority Road Infrastructure does not aggravate already high budget rigidities.
- Mobilizing greater private sector participation in infrastructure investment by advancing the ports and airports laws, and fully operationalizing the PPP law.
While justified by regional infrastructure and social disparities, CODEDEs allocations would benefit from review and improvements. The rapid expansion of CODEDE transfers—driven by large extraordinary allocations and rollover of unexecuted funds—has stretched the government’s planning, control, and monitoring capacity and risks crowding out other priority spending. Going forward, (i) extraordinary allocations should be contained and better-targeted, (ii) continuity of projects should rely on a multi-year pipeline instead of the rollover of unexecuted funds, (iii) project selection should draw on strategic guidance and coordination, including at the departmental level, and (iv) oversight capacity by Comptroller General’s office and the Secretariat for Executive Coordination of the Presidency should be strengthened further.
Addressing fiscal challenges
The oil price shock calls for better targeted social safety nets. In the absence of reliable means-testing capacity, temporary and contained universal fuel subsidy is preferable to earlier-considered alternatives. However, universal subsidies are regressive and weaken price signals. Expanding the coverage and quality of the social registry is critical to enable more targeted responses going forward.
An investment-friendly consolidation should commence in the medium term. The latest Medium-Term Fiscal Framework (MTFF) sees deficits converging to 2 percent by 2031 on account of optimistic revenue mobilization gains and falling investment, coupled with rising current spending. In staff’s view, bringing down deficits should rely on tax policy reforms, while keeping capex at elevated levels and accommodating adequate, well-targeted social spending.
Closing social and infrastructure gaps requires higher fiscal revenues. Despite measurable gains by the Tax Administration (SAT)—in tax compliance, digitalization, tax refund governance, and customs modernization—tax revenues have been hovering near 12 percent of GDP for decades. Converting ongoing and planned SAT’s efforts into higher revenues requires (i) avoiding measures (such as elimination of taxes, introduction of special tax regimes) that further erode the tax base, (ii) limiting domestic and cross-border tax arbitrage, and, ultimately, (iii) undertaking comprehensive tax reforms to rationalize tax expenditures, broaden the tax base and raise tax rates (from extremely low levels, especially for income taxation). Relevant policy analysis should commence promptly.
Ongoing efforts to improve quality of public spending should continue. Better coordination among MinFin, line ministries, and SEGEPLAN, and stronger alignment between development plans, budget allocations and multiannual targets, would improve spending efficiency, targeting, and value-for-money in investment and social programs.
Credible medium-term fiscal planning can deliver predictability of public finances without resorting to costly and stifling revenue earmarking. Aggravated by segmented treasury balances and legal constraints on short-term debt, earmarking leads to excessive long-term borrowing and large non-remunerated government deposits. To maintain predictability of spending, MTFFs should build on—and also inform—multi-year sectoral strategies and spending plans. Improved treasury-debt management coordination and greater reliance on domestic financing—as reflected in MinFin’s latest medium-term debt strategy—would reduce currency risks to debt sustainability, deepen local financial markets, and lower Banguat’s sterilization costs, whose balance sheet is backstopped by the state. A new organic budget law could enable needed reforms while preserving legally-mandated allocations.
Reinforcing monetary and financial frameworks
The monetary policy stance is appropriate. Banguat’s cautious approach to policy easing has, in hindsight, proven appropriate amid heightened uncertainty surrounding commodity prices and external conditions. Well-anchored inflation expectations point to continued policy credibility, while ample reserve buffers provide Banguat with room for maneuver in conducting monetary policy less dependent of U.S. Fed policy movements.
The mission welcomes efforts to improve monetary policy communication and the operational framework. To address communication challenges associated with de facto exchange rate stability under an inflation targeting regime, Banguat could convey more transparently objectives underlying its FX market participation. While the mission supports the latest use of the international reserves accumulation rule in the current high-remittances environment, Banguat should strive to further demystify it in the eyes of market participants. Recent reforms to the operational framework—including narrowing the policy corridor and streamlining term-deposit maturities—are welcome, and should be complemented by strengthening collateral infrastructure, including through a central securities depository. Together with initiatives aimed at further strengthening MinFin-Banguat coordination, these measures will improve monetary policy transmission and liquidity management, reducing pressures on Banguat’s balance sheet. This, in turn, would create scope to gradually lower reserve requirements and improve reserve remuneration.
The mission encourages fast-tracking a new secondary markets law. It would help mobilize domestic savings (thus reducing external imbalances), strengthen monetary policy transmission, enhance financial sector competition and deepen domestic financial markets. The law would also enable erecting the financial infrastructure needed to accommodate potential capital inflows should Guatemala attain investment-grade status. A new e-money law would provide the necessary regulatory foundation for fintech development and broaden access to formal financial services.
Enhanced regulation and supervision will help safeguard financial stability. The banking system remains sound, with strong capital and liquidity buffers and solid profitability. Adopting IFRS accounting would improve transparency and comparability, while the ongoing gradual shift to expected loss provisioning would further increase the system’s resilience. These changes should be accompanied by bolstering supervisory capacity, revamping the 2002 Law on Banks and Financial Groups, and continuing investments in cybersecurity resilience.
Advancing financial integrity, governance and structural reforms
The mission welcomes the Congressional passage of the AML/CFT law, a crucial step in improving financial integrity. A law fully aligned with FATF standards, quickly followed by the swift approval and implementation of accompanying regulations, should well-position the country for GAFILAT’s 2027 mutual assessment.
Good governance and structural reforms will promote investment and inclusive growth. The establishment of the National Anti-Corruption Commission, the code of ethics, the Integrity and Corruption Prevention Strategy 2025–32, should be followed up by advancing pending legislation on beneficial ownership transparency, whistleblower protection, and public procurement. Reductions of non-tariff barriers, agreed under the trade agreement with the U.S., should improve the business environment. Reducing informality would foster more inclusive and sustainable growth.
The mission wishes to thank the Guatemalan authorities for their cooperation and openness throughout the visit and wishes them every success in advancing toward a new equilibrium characterized by high, inclusive, and sustainable growth.
READ MORE: https://www.imf.org/en/news/articles/2026/06/08/mcs060826-guatemala-staff-concluding-statement-of-the-2026-article-iv-mission
