President Andrés Manuel López Obrador has asked Congress to build unprecedented levels of debt, while the financial cost of the debt will exceed one trillion pesos for the second year in a row.
In addition, the federal government will continue to support Petróleos Mexicanos (Pemex) with lower tax payments.
In the 2024 Economic Package presented this Friday by the head of the Ministry of Finance and Public Credit (SHCP), Rogelio Ramrez de la O, A cap on domestic debt of one trillion 990 billion pesos is proposed, a nominal increase of 70% compared to the 1 trillion 170 billion figure approved by Congress for this year.
Regarding the external debt of the public sector, which includes the federal government and the development banks, A net debt limit of $18 billion is required.
Regarding the state’s productive enterprises, Pemex and its subsidiaries claim a net domestic debt of 138 billion pesos and a net external debt of 3.7 billion dollars for next year.
In turn, the Federal Electricity Commission (CFE) and its productive subsidiaries claim for the same year a net domestic debt of 600 million pesos and a net external debt of 1,200 million dollars.
Next year, the financial cost of the debt will rise by 11.8% to a total of 1 trillion 264 billion pesos, compared to 1 trillion 79 billion pesos approved for 2023. This will represent 3.2% of gross domestic product (GDP).compared with a figure of 3% estimated at the end of this year.
The financial costs reflect the expected development of interest rates, as the stimulus package shows. Likewise, a 20-cent appreciation in the average exchange rate was found to reduce financial costs by 2.8 billion pesos as the value of foreign currency-denominated debt in pesos decreased.
The financial expense of the debt is included in non-programmable expenses, which also include contributions to federal and local governments and debt from prior fiscal years.
In 2024, The government proposes to reduce Pemex’s compensation ratio from 40% to 35%.
This represents a release of resources for the oil major of 4.745 million pesos through the reduction of its financial costs, an actual decrease of 7.6% compared to the level approved in 2023. However, it should be noted that the Federal Government’s contribution will be conditional on the company’s commitment to maintaining moderate indebtedness since, to the extent possible, Pemex’s public debt balance reflects a decrease compared to the previous year’s balance.
Pemex’s financial costs will be reduced by 4,745 million pesos, an actual decrease of 7.6% compared to the approved level in 2023, freeing up more resources for the oil company.
The Draft Expenditure Budget of the Federation for 2024 proposes total historical public spending of 9 billion pesos, 4.3% more than approved for 2023, of which 6.4 billion are assigned to programmable expenditures to be carried out by authorities and public sector entities.
The most affected sector is healthcare, with a decline of 55.8%, followed by tourism, with a decline of 24.4%; the Secretariat of Agrarian, Territorial, and Urban Development, with a decrease of 19.5%; and the National Defense, with a decrease of 2.9%.
The same applies to autonomous bodies such as the National Human Rights Commission, with a decline of 8.6%; the Federal Telecommunications Agency, with a decrease of 3.5%; and the Attorney General’s Office of the Republic, with a decrease of 2.5%.
Among the winners, the INE stands out with an increase of 78.2% to a total of 37,770 million pesos. In addition, the Ministry of Energy will increase its budget by 273.2%, the government by 31.8%, and the SEP by only 1%.
55.8% is the cut the government wants to make in health spending by 2024. This branch is punished the most.
