Public Investment Efficiency, Growth and Debt Sustainability in Guatemala

Despite having moderate levels of public debt sovereign spreads, Guatemala is a country with limited levels of public investment efficiency (PIE) that actively constrain much needed infrastructure and social investment. This Selected Issues Paper (SIP) analyzes the effects of improving PIE on key real, fiscal and external macroeconomic indicators and finds that higher PIE would allow Guatemala to sustain higher levels of external debt, weaker fiscal balances and current account balances without worsening sovereign risk premia. The overall effect amplifies the welfare benefits of higher PIE for households through higher private consumption.