President Jeri risks impeachment; election race heats up; fiscal deficit reached 2.2% of GDP in 2025; PEN/USD appreciation persists
We try to answer three key questions in this report: Will Congress impeach President José Jerí? Has the government met its fiscal targets? And is the Banco Central de la República del Perú (BCRP, the central bank) departing from its usual FX intervention policy?
In politics, the focus remains on the risk of Congress’ impeaching Jerí, ahead of the April 12 presidential and congressional elections. As of this writing, Jeri’s fate remains uncertain. Although there were six different motions calling for his impeachment, Congress must call a special session in order to initiate the process, for which 78 votes are required (Congress has secured only 60 votes so far).
The focus last week turned to government finances. The BCRP’s December government finances report indicated that the fiscal deficit had reached 2.2% of GDP. Economy and Finance Minister Denisse Miralles was quick to indicate that the government had met its fiscal target, after two years of non-compliance. In fact, while the deficit was below the 3.4% in 2024, according to the independent Fiscal Council, strictly speaking the government failed to comply with the four targets included in the Fiscal Responsibility Law.
The past week’s message was that the BCRP would continue to intervene in the FX market. A side effect is that the PEN’s value against the dollar will remain stronger, and we have revised our year-end forecast to PEN3.4:USD1, from 3.5 previously. We forecast one more 25 bp rate cut in March, and will reassess after the April 12 election.
Through February 4 the BCRP’s net international reserves increased by $7.1 billion, to $97.4 billion. Of this, $5.5 billion were bought directly by the BCRP; $2.8 billion resulted from banks’ dollar reserves; -$1.1 billion was sold to the public sector; and -$61 million was derived from other transactions. This was atypical; in full-year 2025, the BCRP’s net international reserves increased by only $11.2 billion.
The BCRP intervention policy is designed to smooth out the PEN/USD adjustments, rather than to influence the exchange rate as such. Moreover, its interventions have typically been asymmetrical — more frequent when the currency depreciates than when it appreciates. However, recent interventions may indicate a departure from that policy.
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