Introduction to the Financial Burden of Public Debt in Mexico
According to the federal government’s 2026 Economic Package, the financial cost of public debt will reach an unseen level since 1991. If the proposed measures are approved, 15.6 out of every 100 pesos spent in the following year will go towards debt service.
The Financial Cost of Debt: A Growing Pressure on Public Spending
The financial cost of debt will continue to be a significant pressure on public spending, as outlined in the 2026 Federal Budget Proposal. An estimated 1.57 trillion pesos will be allocated to debt service, which includes interest payments and other related expenses.
If the government’s proposal is adopted, the financial cost will be 10.4% higher than projected for this year. Mexico Evalúa, an independent evaluation organization, states that this will result in daily interest and debt service payments of approximately 4,307 million pesos.
Impact on Essential Areas: Education and Healthcare
As a larger portion of public income is directed towards interest payments and debt service, resources available for crucial development areas like education and healthcare will decrease. In 2026, 4.1% of the Gross Domestic Product (GDP) will be allocated to debt-related financial commitments, while only 2.9% of the GDP will be designated for education and 2.5% for healthcare.
In simpler terms, interest on the debt would be enough to nearly double the budget for either of these strategic sectors. Mexico Evalúa emphasizes that the true difference lies in the purpose and use of these resources, which are essential for maintaining economic stability and fostering social well-being.
Debt Ceiling and Financing Requests
For the upcoming year, the government has requested a domestic debt ceiling of 1.78 trillion pesos from Congress, slightly more than the proposed financial cost for 2026.
The financial cost will constitute 4.1% of the GDP, nearly equal to the requested financing amount. José Luis Clavellina, director of Research at the Center for Economic and Budgetary Research (CIEP), has pointed out that this situation resembles “borrowing to pay off debt,” requiring extreme caution.
Mexico Evalúa likens this to “using one credit card to pay off another.” While public debt isn’t inherently negative, its impact depends on the purpose and use of these resources.
Breaking the Golden Rule of Debt
In the coming year, the government will once again fail to adhere to the so-called “golden rule of debt,” which stipulates that physical investment must be greater than or equal to the debt sought.
The government has proposed a physical investment of 960.1 billion pesos for the upcoming year, a 10% increase from this year’s approved amount. However, this figure is significantly lower than the 1.8 trillion pesos debt ceiling requested by the government.
As a result, only 61 centavos of every peso borrowed will go towards physical investment, the third-lowest proportion since 2009. The remainder, according to Mexico Evalúa, will be used for current spending.
Key Questions and Answers
- What does the unprecedented financial cost of debt in 2026 mean? If approved, 15.6 out of every 100 pesos spent will go towards debt service, leading to daily interest payments of around 4,307 million pesos.
- How will this impact essential areas like education and healthcare? With 4.1% of the GDP allocated to debt-related commitments, resources for education and healthcare will decrease to 2.9% and 2.5% of the GDP, respectively.
- What is the situation regarding the debt ceiling and financing requests? The government has requested a domestic debt ceiling of 1.78 trillion pesos, nearly matching the proposed financial cost for 2026.
- Why is the government failing to follow the golden rule of debt? The proposed physical investment of 960.1 billion pesos is much lower than the requested 1.8 trillion pesos debt ceiling, resulting in only 61 centavos of every borrowed peso going towards physical investment.
