Washington, DC: An International Monetary Fund (IMF) mission led by Ms. Sònia Muñoz conducted discussions for the 2026 Article IV consultation with Peru during March 10-25, 2026, in Lima and Cusco. At the end of the visit, the mission issued the following statement, which summarizes its main conclusions and recommendations:
Sustained growth amid elevated uncertainty
Record-high terms of trade (TOT) underpinned the positive momentum for economic activity in 2025. After a strong recovery in 2024, the economy continued to expand in 2025, reaching 3.4 percent and bringing economic activity close to potential. Growth in employment and income, a recovery in consumer confidence, and low inflation supported private consumption. Private investment grew 10 percent, its strongest pace since 2013 excluding the post-pandemic rebound, buoyed by high metal prices and steady progress of infrastructure projects. The BCRP continued monetary policy normalization, with inflation expectations firmly anchored and inflation around the midpoint of the target band. The current account surplus further improved to 3.1 percent of GDP, reflecting muted effects from trade barriers and strong agricultural export volumes. The fiscal deficit narrowed to 2.2 percent of GDP, meeting the fiscal rule target, but remained high in structural terms.
Growth is projected to moderate, with the impact of high metal prices broadly offsetting the global energy price shock. Under the assumption of limited spillovers from a short-lived war in the Middle East, growth is expected to reach 2.8 percent in 2026. A strong labor market and improving real incomes are expected to support private consumption in 2026, despite some headwinds to domestic demand from the electoral period. Favorable metal prices are projected to improve potential growth. Credit growth is expected to continue a moderate recovery. Higher energy prices would primarily affect transportation and food, temporarily raising headline and core inflation towards the upper range of the 1-3 percent target band in 2026. The current account balance is envisaged to remain in a surplus of 3.4 percent of GDP in 2026 and then gradually return to a deficit, in line with slow normalization of TOT and growing private investment. At current policies, the fiscal deficit would reach 2 percent of GDP in 2026 and remain above the fiscal rule targets in the medium term, with public debt stabilizing around 32 percent of GDP.
The balance of risks to the outlook is tilted to the downside given elevated external uncertainty, but Peru maintains ample buffers against shocks. Key domestic risks in the short term include political uncertainty, social unrest, and weather-related shocks, including a stronger El Niño Costero, while persistently high levels of insecurity and illegal mining could hold back medium-term growth prospects. External risks are dominated by spillovers from a protracted conflict in the Middle East, which could lead to second-round effects on inflation expectations, lower global growth, and tighter financial conditions. Additional external risks include regional geopolitical tensions, protectionism and trade disruptions, commodity price volatility, and prolonged policy uncertainty. On the upside, growth could be higher if high metal prices or increased political stability after the general elections lead to stronger private investment. Peru’s macroeconomic resilience is reinforced by very strong buffers including low public debt, abundant international reserves, and access to international capital markets on favorable terms.
Addressing structural fiscal challenges
Achieving the authorities’ fiscal targets will require rationalizing expenditure. At current policies, consolidation of about 0.9 percent of GDP by 2028 would be required to comply with the medium-term deficit target. Addressing public spending rigidities and inefficiencies as well as resisting unfunded legislative spending initiatives would support the authorities’ fiscal goals, reduce the structural deficit, and avoid crowding out productive public investment. Savings could be obtained by slowing ongoing trends in public employment and wage growth, as well as improving procurement practices and the efficiency of public investment that would maximize growth and social returns. Reforms at Petroperú should proceed to improve governance, reduce costs, and ensure financial viability. Rationalizing spending would also protect space should a more prolonged and intense energy price shock require a fiscal offset. Any fiscal support should be targeted to the most vulnerable, feature clear sunset clauses, and avoid distorting hydrocarbon prices.
Revenue reforms are essential to close infrastructure and social gaps. Peru also faces significant gaps in infrastructure and education and health outcomes, while social protection remains limited. Addressing these gaps without endangering fiscal sustainability will require further reforms to durably raise the low tax-to-GDP ratio beyond the current TOT cycle. The recent Acuerdo Fiscal is a welcome government initiative to facilitate the public debate around fiscal sustainability and tax base expansion.
The recently enacted public private partnership (PPP) frameworks could stimulate investment, but the authorities should carefully manage risks. While the recent boost in projects financed through PPP and works-for-taxes (OxI) could help Peru meet some of its infrastructure needs, it will be essential to closely monitor the accumulation of contingent liabilities and maintain neutrality when it comes to investment modality selection.
The implementation of the 2024 pension reform should proceed cautiously until the associated risks have been mitigated to ensure fiscal sustainability and stability of the pension system. The mandated transition of the public defined benefit system to a notional defined contribution system by 2030 and the facilitated switching of participants between the public and private systems may introduce risks of financing shortfalls for the two pension systems over the medium term. In addition, the original pension reform was significantly weakened in September 2025 upon approval of the eighth round of private pension fund (AFP) withdrawals and the removal of the exclusion from the minimum pension for affiliates who withdraw the entirety of their pension funds.
Maintaining a data dependent monetary policy stance
The current broadly neutral monetary policy stance remains appropriate and the BCRP should continue to allow exchange rate flexibility. The BCRP policy rate currently stands at 4.25 percent, implying an ex-ante real rate of 2.1 percent as of end-February 2026, slightly above estimated neutral rate of 2 percent. Looking ahead, monetary policy should remain data dependent in the context of multiple supply shocks and elevated uncertainty surrounding short-term inflationary pressures and inflation expectations. Continued exchange rate flexibility should be maintained to help cushion the impact of external shocks.
Strengthening financial sector deepening and safeguarding resilience
The financial system remains healthy and systemic risks are contained. Stress test analysis prepared by the authorities suggests that banks would remain sound even under adverse scenarios and contagion risks are limited. Fully operationalizing new regulations and closing remaining regulatory gaps will enhance financial resilience, including reviewing the activation criteria for the counter-cyclical capital buffer and extending recovery plans for systemically important domestic banks to the financial group level and to their resolution planning thereafter.
Addressing structural challenges would promote financial deepening and revive credit growth. The expansion of digital finance is increasing access to financial services, and credit to the private sector has accelerated towards the end of 2025. However, financial deepening has stalled, possibly due to structural limitations such as the high level of labor informality, low financial literacy, and limited usage and access to financial services. Moreover, credit-to-GDP remains below pre-pandemic levels, with the current cyclical downturn mainly reflecting weak demand for credit from subdued private investment levels as well as abundant liquidity from AFP withdrawals and high mining profits, including from illegal mining. Promoting competition and innovation, such as Open Banking and Finance frameworks, could address structural challenges.
READ MORE: https://www.imf.org/en/news/articles/2026/03/25/mcs-03262026-peru-staff-concluding-statement-of-the-2026-article-iv-mission
