Sunday, December 10, 2023

Treasury Alert Replenishment of Mexico’s Stabilization Fund Will Take 11 Years

This was confirmed today by Rodrigo Mariscal, head of the Economic Planning Unit of the Ministry of Finance and Public Credit, in a note from La Jornada, who explained that all this time, even though recessions in Mexico often occur on average every seven years,

The economist recognized that at least 0.5 percent of the Gross Domestic Product (GDP) is needed to deal with the decline in income as recorded in previous declines in economic activity.

Most of the resources that were in the FEIP at the beginning of this administration were spent in 2019, due to the fall in public revenue, the impact of the small recession, and, above all, in 2020, when the coronavirus pandemic resulted in a maximum reduction in economic activity for almost nine decades, he explained.

However, the balance of this fund did not recover with the speed needed to cover the next crisis.

His statements are relevant because this morning in the Senate, the amendments to the Federal Budget and Fiscal Responsibility Law were approved, thus expanding the sources of capitalization for the FEIP with other financial assets of the federal government.

But it does not include resources from productive state companies or social security contributions. The proposal has already been promoted in 2022, he clarified.

Until now, the FEIP has had three sources of income: in the Federation’s Expenditure Budget, 2.2 percent of the federal government’s oil revenue is allocated; 30 percent of the remaining operations of Banco de México, if any; and 65 percent of the surplus income during the fiscal year, if any.

However, the excess income can only be used to capitalize the FEIP; once non-programmable costs are paid, there are resources to deal with natural disasters, support for electricity prices due to higher fuel costs, and low income is covered by other things.

The problem is that these sources are not enough; in history, the highest income (70.6 percent) has not been repeated, but rather fortuitous, in addition to the fact that oil income has been reduced for more than 11 years, which explains why, until now, the FEIP cannot be capitalized at the speed required to deal with economic cycles.

World Nation News Desk
World Nation News Desk
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