IMF Wraps Up 2026 Article IV Talks with Guatemala

Washington, DC: On July 28, 2026, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Guatemala and endorsed the staff appraisal without a meeting on a lapse-of-time basis. ^[1] The authorities have consented to the publication of the Staff Report prepared for this consultation. ^[2]

The 2026 Article IV Consultation for Guatemala met the established Executive Board criteria for lapse-of-time consideration: (i) there are no acute or significant risks, or general policy issues requiring Board discussion; (ii) policies or circumstances are unlikely to have a significant regional or global impact in the near term; and (iii) the use of Fund resources is not under discussion or anticipated.

Recent Developments and Outlook

Prudent macroeconomic management has underpinned Guatemala's resilience. Sound fundamentals-low and stable inflation, solid fiscal and external buffers, and current account surpluses-put Guatemala in a strong position to face ongoing high uncertainty. However, growth potential remains constrained by poor public infrastructure and social indicators remain weak. Large remittances, though supporting consumption, complicate monetary policy and put pressure on competitiveness.

The strong growth momentum has carried into 2026, with economic activity expanding 4.5 percent y/y through April. Driven by the oil price shocks, headline inflation increased to 2.9 percent y/y in May (1.7 percent at end-2025), with fuel-price subsidies limiting the passthrough. Core inflation and inflationary expectations are well anchored. The 2025 fiscal deficit widened to 1.9 percent of GDP, largely driven by capital spending--despite their modest execution--and tax administration gains. Public debt is low and sustainable (27 percent of GDP). The external position further strengthened as 2025 current account surplus reached 4.7 percent of GDP with a record-high remittances at 21 percent of GDP.

The outlook is broadly favorable with balanced risks. Hit by the oil price shock, 2026 growth is projected to dip to 3.8 percent before converging to 4 percent in the medium term as public investment and structural reforms yield returns. Inflation is expected to stay within the monetary policy target. The current account surplus is forecast to narrow, as remittances stagnate and private investment picks up. Both external and domestic risks are broadly balanced, with El Niño posing considerable risks to the near-term outlook.

Executive Board Assessment ^[3]

Strong macroeconomic fundamentals position Guatemala well to navigate high uncertainty and external headwinds. Prudent macroeconomic policies have underpinned resilience, delivering low and stable inflation, solid fiscal and external buffers, and current account surpluses. However, growth potential remains constrained by poor public infrastructure, which dampens private investment. Social indicators are weak, with high informality and poverty levels. In addition, large remittance inflows support consumption but complicate monetary management and weigh on competitiveness.

Risks are broadly balanced. High energy prices and tighter migration and trade policies could further weaken growth and raise inflation. However, faster-than-expected decline in oil prices presents an upside risk, while progress under the bilateral trade agreement could help anchor relations with the U.S. Domestically, implementation constraints and pre-electoral pressures may delay reforms, but recent timely judicial appointments could support progress and strengthen investor confidence. A severe El Niño poses a significant near-term risk.

Increasing growth potential over the medium term will require decisive policy implementation. Main areas of focus are (i) scaling up public infrastructure investment, (ii) improving public financial management and raising revenues, (iii) reinforcing monetary and financial frameworks and (iv) advancing financial integrity, governance and structural reforms.

Higher public investment would reduce the current account surplus and boost productivity and competitiveness, thus supporting external rebalancing and lowering reliance on remittances. The authorities' multi-prong infrastructure strategy is welcome, though swift progress is needed to: (i) reduce bottlenecks and improve project preparation and execution, including by implementing Public Infrastructure Management Assessment (PIMA) recommendations; (ii) streamline public procurement to reduce red tape while safeguarding transparency; (iii) resolve the impasse over the operationalization of the priority infrastructure law without exacerbating budget rigidities; and (iv) mobilize greater private sector participation in infrastructure investment.

Decentralized public investment through Departmental Development Councils (CODEDEs) should become more effective and subject to adequate oversight and control. This should be achieved by containing and better targeting extraordinary allocations. Project continuity should be ensured through multi-year pipelines, and not through the automatic rollover of unexecuted funds into the following year. Project selection should be guided by stronger strategic coordination, including at the departmental level. It is essential to reinforce the oversight capacity of the Comptroller General and the Secretariat for Executive Coordination of the Presidency.

Better targeted social safety nets would improve shock responsiveness. Absent reliable means-testing capacity, temporary and contained universal fuel subsidy can help alleviate the social burden of the oil price shock. However, since universal subsidies are regressive and weaken price signals, expanding the coverage and quality of the social registry would be critical to enable more targeted responses going forward.

An investment-friendly consolidation should commence in the medium term, alongside improvements in spending quality. The Medium-Term Fiscal Framework (MTFF) should anchor fiscal consolidation needed to reduce fiscal deficits to 2 percent of GDP in tax policy reforms, while maintaining elevated capital spending, and preserving social spending. Better coordination among MinFin, line ministries, and SEGEPLAN on development plans, budget allocations and multiannual targets, would improve spending efficiency, targeting, and value-for-money in investment and social programs.

Fiscal revenues should further be increased, building on recent gains in tax administration. Increasing revenues above 12 percent of GDP requires avoiding measures further eroding the tax base, limiting domestic and cross-border tax arbitrage, and undertaking comprehensive tax reforms.

Credible medium-term fiscal planning can ensure predictability of public finances without resorting to costly revenue earmarking. The review and simplification of earmarking in tandem with strengthening the MTFF and multi-year budgeting would preserve predictability of priority spending, improve budget alignment with national priorities, and reduce costly cash balances. A new organic budget law could serve as a vehicle for these reforms.

Stronger treasury-debt management coordination is essential for improving financing efficiency and reduce costs. Greater reliance on domestic funding while developing the local bond market would reduce currency risks, deepen domestic financial markets, improve the macro-policy mix, and lower Banguat's sterilization costs.

While the monetary policy stance is appropriate, monetary policy transmission and liquidity management could be strengthened. 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. It will be important to improve communication of objectives underlying Banguat's FX market participation and of the international reserves' accumulation rule­. Recent reforms to the operational framework-including narrowing the policy corridor and streamlining term-deposit maturities-should be complemented by strengthening collateral infrastructure, including through a central securities depository.

Strengthening regulations and supervision would further safeguard financial stability. To this aim, adopting IFRS accounting would improve transparency and comparability, while bolstering supervisory capacity, revamping the 2002 Law on Banks and Financial Groups, and continuing investments in cybersecurity resilience would help safeguard financial sector resilience.

Fast-tracking a new secondary markets law is critical. It would help mobilize domestic savings (thus reducing external imbalances), strengthen monetary policy transmission, enhance financial sector competition and deepen domestic financial markets, and also enable erecting the financial infrastructure needed to accommodate potential capital inflows should Guatemala attain investment grade. A new e-money law would provide the necessary regulatory foundation for fintech development and broaden access to formal financial services.

The approval of the new AML/CFT law marks an important step toward strengthening financial integrity. A law fully aligned with FATF standards-promptly followed by the approval and implementation of accompanying regulations-should position Guatemala well for 2027 mutual evaluation by GAFILAT.

The governance and structural reforms agenda should proceed apace. Recent initiatives, including the establishment of the National Anti-Corruption Commission, the adoption of a code of ethics, and the Integrity and Corruption Prevention Strategy 2025-32, should be complemented by advancing pending legislation on beneficial ownership transparency, whistleblower protection, and public procurement. In parallel, reducing non‑tariff barriers in line with commitments under the trade agreement with the U.S. would support improvements in the business environment. Guatemala should advance existing initiatives aimed at geographical and product diversification of exports, including through new trade agreements. Efforts to reduce informality would further promote more inclusive and sustainable growth.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/Guatemala page.

[3] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.