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Paraguay Supreme Court ruling favors govt in bond sale dispute

ASUNCION, Feb 22 (Reuters) - Paraguay's Supreme Court ruled in favor of the Treasury Ministry on Wednesday in a dispute over the constitutionality of a proposed bond sale, allowing it to issue $550 million in debt next month.

President Horacio Cartes' government plans to use the sale to pay off existing debt and finance infrastructure projects in the landlocked South American country.

Opposition legislators and dissident members of Cartes' center-right Colorado party had challenged the constitutionality of the planned sale. In December, Cartes vetoed a budget proposal passed in Congress that limited the amount of debt issuance allowed to $349 million.

The unprecedented budget veto meant that the 2016 budget remained in place, but the opposition claims that does not give the Treasury Ministry the authorization to sell bonds.

"Even though it's not a requirement to have a favorable ruling from the Supreme Court, we asked for this Action of Judicial Certainty as an assurance to international investors," the Treasury Ministry said in a statement.

Legislators have threatened to notify international bodies, rating agencies and bondholders that an eventual issuance could lack legal backing.

The grains-exporting country has issued $1.88 billion in debt since Cartes, a businessman, came to power in 2013.

(Reporting by Daniela Desantis; Writing by Luc Cohen; Editing by Richard Chang)