The fiscal space that the Mexican government has to put into public policy has shrunk. According to the statements of Rogelio Ramirez de la O, Minister of Finance and Public Credit (SHCP), from the proposed budget for next year, in the amount of approximately 8.3 billion pesos, 80% mandatory expenditures, that is, the government cannot ignore them.
“Eight out of every 10 pesos of total net expenses correspond to mandatory expenses, the most important of which are: financial cost, pension and retirement, state and municipal participation, corporate and entity expenses, as well as expenses of independent branches,” he announced before House lawmakers, during his appearance before Gloss Fourth Government and Economic Package 2023 Report.
To applause and boos, for about six hours, the Treasury official explained that among the spending priorities, the main programs and works of the government of Andrés Manuel Lopez Obrador, which seek the welfare and development of the population.
In addition to complying with mandatory expenditures, this proposal served to focus the available resources on priority aspects of the Government of Mexico, such as: attention to the most backward groups of the population, regional and inclusive economic development, and the strengthening of measures to combat inflation and famine,” he said at the plenary session of San Lazaro.
In this sense, he noted that the Union’s Project Expenditure Budget (PPEF) 2023 proposes spending on social investment and physical investment projects in the areas of health, safety and education.
In detail, it was noted in PPEF 2023 that out of the 1.10 billion pesos proposed for physical investment, 21.4% will be allocated to priority projects of the current administration, such as the Maya Train and the Isthmus of Tehuantepec.
From 25% higher cost of debt due to rates
The financial cost of debt was one of the issues the Treasury Secretary was questioning, which refers to the resources that the government must allocate to pay interest, as well as other debt services it maintains both nationally and internationally.
For the following year, the financial cost of debt is expected to exceed one trillion pesos, which will stand at 3.4% of GDP. This represents an increase of nearly 30% in these expenses.
Ramirez de la Ou explained that the increase is a result of expectations of tightening monetary policy at the international level, which began to appear since last year, and continued to face high levels of inflation.
“The fiscal cost of 2023 includes one of the monsters that affected us in the 1980s, and later in the 1990s, that caused debt crises, which is the rate hike,” he emphasized.
Compared to 2021, the fiscal cost increased by 0.8 percentage points of GDP.
He explained that “that increase of 0.8 represents 26% of the additional cost, i.e. the increase of 26% is for the net interest rate.”
Confidence in the local market and near leasing
The Treasury Secretary noted that the macroeconomic framework in the 2023 economic package proposes GDP growth in the range of 1.9 to 3.0 percent. Figures that contradict, for example, the Organization for Economic Co-operation and Development’s 1.5 percent forecast.
He added that economic growth in the following year will be driven by the strengthening of the domestic market, as well as by the relocation of companies in the country, the so-called near-employment that has been promoted in Mexico in recent months.
According to the 2023 economic package, it is expected to spend about 8.3 billion pesos, which corresponds to the income estimated in the Federal Income Act Initiative (ILIF) 2023, the resources that will be obtained mainly from paying taxes to taxpayers, even without tax reform or tax miscellaneous.
Ramirez de la O noted that the PPEF is balanced, responsible and realistic, a discourse already heard in San Lazaro in previous years, and emphasized that it supports the recovery of the economy under the principles of austerity, efficiency and rationality.
“It is very important to emphasize that this economic package, on the instructions of the President of the Republic, lays the foundations for planning for a responsible, orderly and smooth transition to the next administration of the package presented,” the Treasury Secretary said. .