Mexico's public deficit, measured through the Public Sector Financial Requirements (RFSP), has reached unprecedented levels, according to the Ministry of Finance and Public Credit (SHCP). As of August 2024, the RFSP totaled 1.10 trillion pesos, marking a 53% increase compared to the same period last year.
This year's debt levels, as indicated by the RFSP, are the highest recorded since 2008, when the SHCP began tracking this indicator. The organization Mexico Evalúa noted that former President Andrés Manuel López Obrador's promise to avoid increasing national debt has not been fulfilled, as the RFSP shows a level exceeding that of previous economic crises.
The deficit for January to August surpassed 1 trillion pesos, three times higher than in 2018, reflecting a 203% increase in real terms. The government has not faced such high levels of debt even during the COVID-19 pandemic or the 2008 financial crisis. The new administration, led by Claudia Sheinbaum, faces significant challenges ahead.
For 2024, the RFSP is expected to close at a historic level of 5.9% of the Gross Domestic Product (GDP). The SHCP indicated that this debt was incurred to complete priority infrastructure projects, such as the Maya Train and the Dos Bocas Refinery, to avoid passing these financial pressures to Sheinbaum's administration.
As of August, the total historical debt reached 16.5 trillion pesos, an 11.5% increase from the previous year. Of this amount, 12.33 trillion pesos were in national currency, while 4.2 trillion pesos were contracted in foreign currency.
Sheinbaum's immediate challenge is to stabilize the RFSP next year to between 3% and 3.5% of GDP through fiscal consolidation, which may involve increasing budget revenues and reducing public spending. However, the Economic and Budgetary Research Center (CIEP) warns that a reduction of 1.8% of GDP in the budget deficit is necessary.
The CIEP emphasizes the need for comprehensive tax reform to improve revenue collection and promote fiscal equity. While Sheinbaum may initially continue López Obrador's approach of avoiding tax reform, the pressures on public spending indicate that significant changes may be necessary.
Despite potential cuts in public spending, achieving the targeted deficit reduction to 3% of GDP may prove challenging. The CIEP's calculations suggest that completing emblematic projects and lowering average interest rates could reduce the deficit by 1.1% of GDP, but this alone will not suffice to meet the 3% target.
For effective and sustainable fiscal consolidation, the CIEP calls for comprehensive tax reform discussions to expand the tax base and improve spending efficiency, ensuring fairness across social sectors and generations.