Key Findings and Relevant Entities
According to a study by the Center for Research on Public Finance (CEFP), as of the third quarter of 2025, Nuevo León holds the highest subnational debt-to-total-income ratio at 75.9%. This is followed by Chihuahua (52.8%), Coahuila (51.2%), and Quintana Roo (41.5%). On the other end, Guerrero has the lowest debt pressure with only 1.6% of its total income dedicated to debt.
Understanding the Debt-to-Total-Income Ratio
The debt-to-total-income ratio is calculated by dividing the total subnational debt (including state, municipal, and public organization debts) by the total annual income of each federal entity. This income comprises local taxes, fees, products, and contributions, as well as federal allocations and participations.
Positive Trend in Debt Management
The CEFP report highlights a positive and consistent trend in managing subnational debt since 2016. The ratio peaked at 33.3% in 2016 and remained around 30% until 2021. A more pronounced decline began in 2022, reaching a historic low of 22.9% in the third quarter of 2025.
Entity-wise Debt Reduction
Between 2016 and the third quarter of 2025, 30 out of 32 federal entities reduced their debt-to-total-income ratio. Yucatán is the exception, with its ratio increasing from 10.4% to 15.1%.
Impact of Fiscal Discipline Laws
The implementation of the Fiscal Discipline Law for Federal Entities and Municipalities in 2016 aimed to control subnational debt levels. Between 2016 and the third quarter of 2025, five federal entities made significant strides in reducing their debt-to-income ratios.
- Quintana Roo: Reduced its ratio by 48.5 percentage points, from 89.9% to 41.5%
- Coahuila: Achieved a reduction of 40.3 percentage points, from 91.5% to 51.2%
- Sonora: Decreased by 30.7 percentage points, from 70.4% to 39.7%
- Chihuahua: Reduced by 29.3 percentage points, from 82.0% to 52.8%
- Veracruz: Lowered by 23.4 percentage points, from 50.9% to 27.5%
Importance of the Debt-to-Total-Income Ratio
The CEFP emphasizes that this ratio helps quantify the proportion of total income a federal entity would need to allocate if it sought to fully pay off its debt, providing valuable insights into fiscal management and debt sustainability.
