Paraguay's president has called on fellow members of the government to "stop robbing" from the South American country.

President Horacio Cartes made the statement on Tuesday during a passionate speech at the city of Villa Hayes, where subsidised housing is being built for elderly people about 50 kilometres northeast of Asuncion.

"Stop robbing. Don't rob anymore. It's the people's money,'' Cartes said. 

The president did not call anybody out by name. He said he was honoured whenever he heard that government corruption was being eliminated, adding that "we'll cut off the hand" of any corrupt official.

Paraguay, a small and poor country of just under seven million people, has long had problems with government graft. Two former Cabinet ministers of the previous administration are currently being tried on corruption charges.

Cartes, a tobacco magnate and one of the country's richest men, owning banks, a sports team and farms, has himself been accused of corruption and illegal acts numerous times in the past.

He had been arrested over allegations of currency fraud, investigated for alleged tax evasion and accused of drug trafficking by the US.

The leader was jailed for nearly a year in 1989 for illegal currency dealings, but was later acquitted.

Source: Agencies