Understanding the Financial Challenge
According to calculations by Mexico Evalúa, a prominent Mexican evaluation organization, the federal government will need to spend approximately 20,000 million pesos daily this year to fulfill its financial commitments.
Nature of Financial Obligations
These commitments encompass a wide range of expenses, including interest payments on the national debt, transfers to states and municipalities, pension payouts (both contributory and non-contributory), civil servant salaries, and transfers to the Federal Electricity Commission (CFE) and Pemex.
Projected Income vs. Expenses
Mexico Evalúa highlights that by 2026, the government will need to allocate nearly 20,000 million pesos daily just to cover its existing commitments. However, with projected income from taxes, rights, and petroleum sales estimated at around 18,000 million pesos per day, the government faces a significant shortfall.
Daily Borrowing Requirement
Each day, the government will have to borrow an additional 2,000 million pesos to meet these expenses.
Government’s Financial Outlook for the Year
The federal government plans a historic expenditure of 10.1 billion pesos this year, with 1.78 billion pesos financed through domestic debt and the rest from public revenues, primarily taxes projected at 5.8 billion pesos.
Key Areas of Spending
Transfers, Pensions, and Debt Interest as Major Expenses
Over the past few years, transferences to states and municipalities, pension payments, and debt interest have been the most significant pressures on the budget.
- Transferences: The government will spend around 5,655 million pesos daily on these.
- Pensions: Daily expenditure on pensions is estimated at 5,422 million pesos.
- Debt Interest: 3,847 million pesos are allocated daily for debt interest payments.
- Personnel Services: 3,403 million pesos are earmarked for personnel services.
- Pemex Support: Daily spending on Pemex support amounts to 722 million pesos.
- Health Sector Transfers: 504 million pesos are allocated daily for transfers to the health sector.
- Electricity Tariff Subsidies: 240 million pesos are spent daily on electricity tariff subsidies.
Future Financial Challenges
By 2026, the government will have to borrow heavily from the start just to cover its basic commitments. This is only the beginning; additional resources are needed for social, environmental, and security goals. The real challenge lies in securing the necessary funds for student scholarships, childcare, public investment, and security amidst a slowing Mexican economy.
Economic Growth Projections
The Secretaría de Hacienda y Crédito Público (SHCP) anticipates a GDP growth between 1.8% and 2.8%. However, various organizations and institutions project a lower growth rate of around 1.5%.
Key Questions and Answers
- What are the main financial obligations of the Mexican federal government? The government’s commitments include interest payments on national debt, transfers to states and municipalities, pension payouts, civil servant salaries, and transfers to CFE and Pemex.
- Why is the government projected to spend 20,000 million pesos daily? The government needs this amount to cover its financial commitments, as projected income falls short of these expenses.
- What are the primary areas of spending for the government? Major spending areas include transferences, pensions, debt interest, personnel services, support for Pemex, health sector transfers, and electricity tariff subsidies.
- What are the future financial challenges for the Mexican government? The government faces the challenge of securing additional resources to meet social, environmental, and security goals amidst a slowing economy.
- What are the GDP growth projections for Mexico in 2023? The SHCP projects a GDP growth between 1.8% and 2.8%, while other organizations forecast a lower rate of approximately 1.5%.
