December 15, 2016 / 7:30 PM / a year ago

Paraguay's Senate cuts bond issuance allowed in 2017 budget

BUENOS AIRES, Dec 15 (Reuters) - Paraguay’s Congress reduced the approved amount of debt issuance allowed in 2017 in the budget bill it passed on Thursday, a blow to President Horacio Cartes.

The government has warned it could veto the budget proposal after it was altered by the Senate in what would be an unprecedented move in the tiny South American nation.

Senators reduced the amount of bonds allowed next year to $349 million from $558 million proposed by the government, which is counting on issuing debt abroad to build infrastructure.

Paraguay has emitted $1.88 billion in international bonds under Cartes, a former business magnate of the center-right Colorado party.

“We can’t continue indebting our country to levels that our grandchildren will continue to pay,” said Senator Silvio Ovelar, a dissident member of the Colorado Party.

The budget expects economic growth of 3.8 percent in 2017, down form 4 percent in 2016, with inflation of 4.5 percent. (Reporting by Daniela Desantis and Mariel Cristaldo; Writing by Caroline Stauffer; Editing by Bernard Orr)

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