Mexico reduces its deficit at the cost of less support in the pandemic: IMF

The lower fiscal support deployed by the government during the pandemic was what allowed for comparatively small primary balances.”

Fiscal Monitor

The International Monetary Fund (IMF) estimates that Mexico will register a public deficit equivalent to 3.8% of the Gross Domestic Product (GDP) this year, a proportion higher than the 3.2% projected by them in April.

According to the experts of the financial organization, this deficit will be gradually reduced to 2.7% of the Product in 2024, which will complete a downward trajectory from the peak reached in the year of the pandemic, 2020. , when it registered a level equivalent to 4.4% of GDP.

Within the semi-annual report Fiscal Monitor, where they make an in-depth review of the world’s fiscal conditions, the IMF experts specified that this downward trend in the balance of Mexico’s public accounts has its origin in “the less fiscal support deployed by the government during the pandemic, allowing for comparatively small primary balances.”

Indeed, within the Fiscal Monitor, it is observed that Mexico’s deficit this year, of 3.8% of GDP, is lower than that of the rest of its emerging peers, which will have an average fiscal deficit of 6.2% of GDP this year. .

In the same document, IMF experts calculated that the government’s general income this year will be equivalent to 24.6% of GDP, a proportion that is similar to those registered in 2016 and 2017, when the first fruits of the reform were collected. treasury

According to the professor of the Autonomous Technological Institute of Mexico, Víctor Gómez Ayala, the government has been lucky with oil prices, by granting it flexibility to distribute extraordinary resources.

This is reflected in the income metric compiled by the IMF as well as recent administrative changes that have helped to strengthen income.

Stable debt below average

The IMF information collected in the aforementioned report shows that the general debt of the Mexican government for this year will be equivalent to 56.8% of GDP, completing two consecutive years of downward trend since the peak reached in 2020, when it represented 60.1% of GDP.

According to Monetary Fund calculations, this proportion of Mexican debt will continue to fluctuate around 59% of GDP between 2023 and 2024.

In this fiscal metric, Mexico also compares reasonably better than the rest of its emerging peers where the average debt is 65.1% of GDP.

Protect the most vulnerable

During the launch of the report, the director of Fiscal Affairs of the IMF, Vitor Gaspar, commented that the increase in food and energy prices increased the risks of social unrest in low-income countries.

He explained that after the pandemic there was an advance in world poverty that has been aggravated by food and energy inflation.

Hence the importance of governments reengineering their spending to free up resources that can be used to help the most vulnerable, whether they are lower-income households or poorer states.

He suggested strengthening their financial buffers in case they have extraordinary income, reducing their debts and leaving a fiscal space that allows them to respond to external shocks.

For his part, Gómez Ayala explained that in the case of Mexico, as in that of several countries facing the same adverse environment, there is little room for adjustment.

That is why he considers that the agency’s experts focus on recommending that they avoid collection waivers. It is a relatively simple tool to implement compared to other more complex measures such as a tax reform.

ymorales@eleconomista.com.mx