The Mexican government’s borrowing policy over the last few years, combined with the performance of exports, has led to an increase in interest payments on public sector external debt, which have decreased from 2.1% of total exports in 2018 to 1.9% of total exports in 2022.
Public sector external debt financing costs amounted to $10.8 billion in 2022, up from $10.4 billion in 2021, representing an increase of 4.4% in nominal terms.
Both principal and interest service payments on public sector external debt constituted 4.1% of GDP in 2022, compared to 4.4% of GDP in 2021.
With the exception of measures to address the pandemic, Mexican fiscal policy continued to be restrictive in order to keep the fiscal balance under control.
In November 2019, the Republican Austerity Law was approved, which aims to contribute to the good management of public resources, and focuses mainly on reducing non-priority current spending.
Then, in 2020, the federal government introduced fiscal measures to minimize the effects of the Covid-19 pandemic on health and the economy, for an estimated amount equivalent to 2% of GDP.
Indebtedness policy
On the other hand, measures were issued to cut spending, with the exception of priority programs.
In general, the Mexican federal government’s finances showed an improvement between 2018 and 2019, when a deficit of around 2% of GDP was recorded.
With the Republican Austerity Law, an attempt was made to reduce the deficit; however, as a result of the economic recession caused by the pandemic, there was a deterioration in revenue collection and an increase in spending (albeit moderate).
The federal government deficit rose to 2.5% and 3.1% of GDP in 2020 and 2021, respectively.
Mexico‘s GDP expanded 3.1% during 2022, driven by strong manufacturing activity and robust local consumption, especially during the second half of the year, during which the growth rate was 4.0 percent.
In addition, the external sector supported growth, and international trade and remittances reached twelve-month highs during April 2023 at US$1.2 trillion and US$60.3 billion, respectively.
