Treasury will continue refinancing debt in 2023 to mitigate risks

The Ministry of Finance and Public Credit (SHCP) will continue to refinance Mexico’s debt next year in order to guarantee the stability of the public debt, in accordance with the 2023 Annual Financing Plan.

“The government of Mexico will continue with liability management operations to mitigate debt portfolio risks and liquidity pressures,” the agency stated.

The refinancing operations that are carried out will be carried out both in the local debt market and in the international one, added the Ministry of Finance. With this, it will be intended to maintain the sustainability of the public debt in the medium and long terms, in a stable path of the level of the debt with respect to the Gross Domestic Product (GDP).

On the other hand, the document explains that the local market will be the main source of government financing, while the international will only be used in a complementary way, when favorable financing conditions can be obtained.

The Mexican government will continue with the responsible and transparent management of public liabilities, in order to strengthen public finances and public debt. The public debt policy collaborates with the income and expenditure policy to maintain resilient public finances. highlighted the SHCP.

The Treasury highlighted that this year it sought to refinance the next bond maturities, give depth to the issuances and provide liquidity to the market, which made it possible to guarantee the soundness of public finances in the face of the different macroeconomic scenarios that occurred during the year.

He added that by 2023 the sustainable financing strategy will be maintained with the placement of bonds based on the Reference Framework of Sovereign Bonds Linked to the Sustainable Development Goals (SDG).

Mexico has issued four sustainable bond markets, in dollars, euros and yen.

Debt would close at 49.8% of GDP

In the 2023 Annual Financing Plan, the Ministry of Finance made an upward modification compared to the end of this year, of the Historical Balance of the Public Sector Financial Requirements (SHRFSP) –the debt in its broadest measure– with respect to the latest projection disclosed in the Economic Package.

Now, the debt is expected to close at a level of 49.8% of GDP, lower than the 51% of GDP that was approved for this year, but higher than the estimate of the 2023 Economic Package of 48.9 percent. In this way, the debt in its broadest measure would close at 14.2 trillion pesos this 2022.

“The main component of the SHRFSP is the Federal Government’s debt, which represents 80% at the end of 2022, an amount that amounts to 9.4 trillion pesos for internal debt and 118.8 billion dollars for external debt,” said the Treasury.

For next year, the Treasury estimates that the SHRFSP will be at 49.4% of GDP.

historic ceiling

In accordance with the Federal Income Law (LIF) for next year, the federal government requested an internal debt ceiling of 1 trillion 170,000 million pesos, which represents a growth of 31.1% compared to what was approved for this year. , and the largest debt in history.

“The main objective of the debt policy will be to maintain the percentage of debt with respect to GDP stabilized around 50% and to maintain strict adherence to the debt ceilings authorized by the H. Congress of the Union”, explained the Treasury in the Criteria General Economic Policy 2023 that he presented on September 8.

So far in the current administration, the domestic debt request submitted to Congress has increased by 127 percent.

In 2019, the first year of the López Obrador government, the request was for 514.500 million pesos, a figure that gradually increased until it doubled.

This could contrast with what was observed in previous administrations.

For example, in the first five years of the government of Enrique Peña Nieto, the debt ceiling increased 19.3%, while in the same period of Felipe Calderón it did so by 56.2 percent.

Regarding the debt that can be contracted abroad, it has presented a quite modest increase in comparison with the internal debt.

The income law for next year exposes a request for an external debt ceiling of 5.5 billion dollars, which barely represents an increase of 100 million dollars compared to the first year of the López Obrador government, when 5.4 billion dollars were requested. Dollars.

anamartinez@eleconomista.mx