Pension budget puts pressure on public finances

The expenditure that the federal government foresees for the payment of pensions in 2023 within the Federal Expenditure Budget Project (PPEF) by 2023 it is unsustainable and squeezes public finances in an environment of low economic growth such as the one Mexico is currently experiencing, as Jorge Sánchez Tello, director of Applied Research at the Foundation for Financial Studies (Fundef), considered.

It should be noted that in the proposal submitted to the Union Congressthe Ministry of Finance reported that it would allocate 1.7 billion pesos to the payment of pensions, (20.4% of the total budget contemplated by the Mexican government) including the one that will be given to the Ministry of Welfare, which represents an increase of 14.3% compared to what was planned for the current year.

This amount also includes contributory pensions, such as Pemex and Federal Electricity Commission (CFE), and the social and priority programs that the government of Andrés Manuel López Obrador has.

In an interview for El Economista, the specialist explained that by not increasing the income that can fund these pensions, what will happen is that greater pressure will be generated on public finances.

“Although it is recognized that there are acquired rights in pensions, we have to find a way to be able to finance them without putting the country’s public finances at risk,” he reiterated.

Jorge Sanchez Tello He pointed out that there are factors that influence the government to decide to allocate more resources for pensions, such as a greater aging of the population that receives a public pension, inflation, since we are going to have a greater number of the aging population, however, they should be sought the mechanisms to also generate more income.

“The risk and challenge are public pensions such as CFE, Pemex, states and municipalities, as well as public universities because they simply squeeze public finances,” added Sánchez Tello.

welfare pension

According to an analysis by México Evalúa, from 2018 to 2023, spending on Pension Welfare for older adults will have grown 629 percent. It is estimated that its spending, once approved by Congress, will reach 335,000 million pesos, which represents an increase of 34%; 85,000 million pesos compared to 2022, and will accumulate 35% of total spending on government transfers.

“Most of the increase in subsidies for next year, 68%, will be due to the larger budget for this pension program, the flagship of the current administration,” they indicate.

“From 2018 to 2023, Pensions for the Elderly will have grown in great volume, but at what cost? In the same period, total spending on subsidy programs increased by only 13 percent. That is to say, the increase in the consented program of this Government occurred at the expense of other programs”

Likewise, they explain for next year, the budget, which has to be approved no later than November 15, proposes an expense of 951,000 million pesos for subsidy programs, which represents a growth of 15% compared to what approved for this year.

“In the last 4 years, pensions for the elderly grew 629%, and if the PPEF 2023 is approved, it will imply a high cost that, being granted universally, does not benefit the most needy sectors and will come at the expense of other programs, For this reason, the study documented the disappearance of programs dedicated to education, science, security, health, and the environment.”

According to México Evalúa, in 2023 we will reach two new records in social programs, but unfortunately, it will not be in the total amount of support or in their governance, but in the concentration of resources and their incorrect geographical classification.

”It cannot be denied that the Elderly Welfare Pension is a relevant program for the economy of many people; However, Mexico has problems that should not be neglected, and it must also be taken into account that pensions are not focused on the poorest, but are granted universally, to all adults over 65 years of age”, they emphasize. .

“In fact, the Ministry of Finance calculates that the poorest 20% of the population obtains 7.7% of the resources of this program, while the richest 20% obtains 20.9%. In other words, the social program with the largest budget, which concentrates more resources each year, is regressive”.

According to the Ministry of Welfare at the end of June, 11 million 586,671 people have been beneficiaries of this program. Of the total, 936,575 older adults reside in indigenous or Afro-Mexican municipalities or localities.

Data at the end of February, indicate that in Mexico City there are 1 million 182,951 people who receive the payment of the PBAM with which it occupies the first place of the 32 states.

It should be noted that the Federal Income Law 2023, which is already in the Senate of the Republic for approval, contemplates income of 8.29 billion pesos, resources that will be obtained mainly from the payment of taxes by taxpayers, even without a tax reform or a Tax Miscellaneous. Of this amount, 4.6 billion pesos will be obtained from tax collection.

alba.servin@eleconomista.mx