The International Monetary Fund rules out a financial crisis due to Mexico’s debt

The Mexican Institute of Financial Executives (IMEF) has confirmed that the current indebtedness and the debt proposed by the government of Andrés Manuel López Obrador for 2024 will not create a financial crisis let alone halt economic growth in Mexico.

“There are elements worth considering that allow us to believe that there is unlikely to be a financial crisis, and growth is unlikely to be at risk; it is important that we take them into account so as not to create negative expectations.” “, stated the IMEF Technical Advisory Committee.

“If after 2024 we return to a deficit that grows at the same rate as G = 3, for example, and remains as a share of GDP between 3.0-3.7%, the debt will reach nearly 70% of GDP in 2030,” he added. : “It will be sustainable.”

Even if the increased debt is sustainable, the key issue will still be how to use these additional resources, because when used well they can even reduce debt as a share of GDP and expand fiscal space, the IMF said.

The IMEF Technical Advisory Committee noted that it makes no apologies for public spending while analyzing the feasibility of current debt and 2024 debt leading to a financial crisis and halting growth.

“It is dangerous not to prioritize spending on investment, health, education and security,” commented economists who compile the IMEF index month after month.

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They added that Pemex cannot exit the equation, given that it has a growing deficit and a lack of exploration that has led to a decline in proven reserves.

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In addition, the refining system has already incurred a loss of more than P700,000 million from 2019 to 2022, they explained.

The committee noted that “the deficit in the years 2022, 2023, and 2024, amounting to 4.3%, 3.8%, and 5.4% of GDP, respectively, and the debts incurred, cannot be justified.”

The International Economic Forum noted that debt as a proportion of GDP is not of great importance, as many developed countries exceed 100%.

“Mexico has less than 50% of debt as a share of GDP, while the United States has more than 100% and Japan has more than 200%; but they are not comparable, and that does not mean we are better than them. In any case, the Mexican share is reasonable.” .

First of all, income in Mexico as a share of GDP is very low, so it is urgent that we work to increase it.

Regarding debt measured in years of income, the International Monetary Fund explained that the debt in Mexico is 2.6, which is the same as in Canada and slightly higher than the debt in the United Kingdom, while the debt in the United States is 3.4.

“For Mexico, it is not a concern,” he said.

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On the other hand, the payment of interest and expenses on debt as a proportion of total income, if it continues to grow, will further reduce the resources allocated to investment, growth and well-being.

The expected numbers will be lower than those for the first six or seven years of this century. Reasonable future deficit programming and good financing would solve this problem.

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He explained that debt per capita can indicate an economy’s ability to sustain debt indefinitely, so Mexico’s quotient puts it in good stead.

He added that the debt file, with an average age of 8 years for internal debt and 20 years for external debt, most of it at a fixed rate, highlights the good management of financing undertaken by the Treasury, highlighting the IMEF.

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