The six-year term of President Andrés Manuel López Obrador (AMLO) will close with the highest debt of the 21st century, with a balance of more than 17 trillion pesos, according to data from the Ministry of Finance and Public Credit (SHCP).
This amount of 17.04 billion pesos was announced yesterday by the SHCP through the General Precriteria of Economic Policy 2025, and is equivalent to 50.2 percent of the Gross Domestic Product (GDP) of Mexico.
When AMLO arrived at the presidential chair in December 2018, the total debt reflected in the Historical Balance of the Financial Requirements of the Public Sector was 10.55 billion pesos and for his last year of government this balance will close at 17.04 billion pesos.
During the government of Enrique Peña Nieto, the debt went from 5.45 trillion pesos at the end of 2011 to 10.55 trillion pesos in 2018, according to nominal figures from the Treasury.
By 2025, the agency headed by Rogelio Ramírez de la O estimated that Mexico’s net debt will reach 18.1 trillion pesos.
The deputy director of economic analysis at CIBanco, James Salazar, considered that these debt levels do not represent a “red light” for the Mexican economy, but rather a wake-up call to improve income capacity.
We are not in a red light because the levels are still manageable, we are not in a situation like other economies of the same size that have deteriorated their public finances as a result of the pandemic. James Salazar, deputy director of economic analysis at CIBanco.
In the case of Mexico, he explained that the main problem is that there is little room for maneuver in public finances, that is, there are expenses that continue to grow, but income does not increase at the same speed.
He explained that the increase in public spending has been to pay for social programs such as those related to the delivery of pensions, Youth Building the Future or Sowing Life that do not have a clear objective of how the development of people will improve and above all that they do not always depend of that support.
The same thing happens with the spending allocated to flagship works such as the Olmeca refinery in Dos Bocas, Tabasco or the Mayan Train, since it is not clear what the contribution will be to the growth and development of the country. However, they are projects that have absorbed greater resources than what was budgeted.
In addition to this, Salazar commented that the payment of interest on the debt is another expense that the government must attend to, since by increasing the debt, the payment of interest also increases and therefore limits spending for other items.
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“More was spent than expected and conditions were not created to create a positive multiplier effect in the economy, what it seems is that the government removed resources from the economy for activities that do not seem productive (…).”
The relevant thing is not that you go into debt, but that you have not gone into debt to generate conditions that lead to better economic growth.
2024-03-28 20:02:41
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