MerchantCountry.php

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<?php
namespace Magento\Paypal\Model\System\Config\Source;

class MerchantCountry implements \Magento\Framework\Option\ArrayInterface
{
    protected $_configFactory;

    protected $_countryCollectionFactory;

    public function __construct(
        \Magento\Paypal\Model\ConfigFactory $configFactory,
        \Magento\Directory\Model\ResourceModel\Country\CollectionFactory $countryCollectionFactory
    ) {
        $this->_configFactory = $configFactory;
        $this->_countryCollectionFactory = $countryCollectionFactory;
    }

    public function toOptionArray($isMultiselect = false)
    {
        $supported = $this->_configFactory->create()->getSupportedMerchantCountryCodes();
        $options = $this->_countryCollectionFactory->create()->addCountryCodeFilter(
            $supported,
            'iso2'
        )->loadData()->toOptionArray(
            $isMultiselect ? false : __('--Please Select--')
        );

        return $options;
    }
}