Macro Analysis /
Global

Mexico: Public Finances – $185.0 billion deficit in the PSBR up to February

  • Year-to-date, the PSBRs accumulated a $185.0bn deficit (~US$9.0bn), with a $72.9bn primary deficit (~US$3.5bn)

  • Expenditures rose 5.1% y/y in real terms. Revenues fell 0.7%, dragged by VAT and excise tax revenues

  • The HBPSBR stood at $13.4tn (~US$646.8bn), with domestic debt representing 66.7% of the total

Francisco Jose Flores Serrano
Francisco Jose Flores Serrano

Senior Economist, Mexico

Banorte
31 March 2022
Published by
  • Yesterday, the Ministry of Finance (MoF) released its public finance report for February 

  • Public sector borrowing requirements (Jan-Feb): $185.0bn deficit (~US$9.0bn) 

  • Public balance (Jan-Feb): $170.4bn deficit (~US$8.3bn) 

  • Primary balance (Jan-Feb): $72.9bn deficit (~US$3.5bn) 

  • Budget revenues fell 0.7% y/y in real terms, higher in oil (+6.2%) but with non-oil revenues contracting (-1.9%). In the latter, we highlight the 10.4% expansion in income tax, with VAT weaker at -10.0% 

  • Expenditures were up 5.1% y/y in real terms, with important growth in IMSS (+17.2%) and CFE (+8.8%), while autonomous (-10.0%) and administrative branches (-1.2%) were lower 

  • In February, revenues backtracked 5.0% y/y with declines in practically all components. Spending was lower by 1.7%, with a contraction in autonomous and administrative branches 

  • The Historic Balance of Public Sector Borrowing Requirements (HBPSBR) stood at $13.4 trillion (~US$646.8bn)

PSBRs deficit of $185.0 billion in the first two months of the year. The MoF released its public finance report for February, in which we highlight the $185.0 billion deficit in Public Sector Borrowing Requirements (PSBR) –the broadest measure of the public balance[1]–. This compares to the $113.1 billion deficit seen in the same period of 2021. The ‘traditional’ public balance posted a $170.4 billion deficit, lower than anticipated given more modest expenditures, despite revenues disappointing. Finally, the primary balance had a $72.9 billion deficit (expected: -$115.5 billion).

Total revenues down 0.7% y/y in real terms. Revenues reached $986.8 billion in the month, $75.3 billion below budget. Oil-related income came in at $144.9 billion, +6.2% in real terms, mainly driven by higher oil prices albeit with a decline in exports. Meanwhile, tax revenues amounted to $660.1 billion, lower than projections by $35.0 billion. Inside, performance was mostly negative, highlighting VAT (-10.0%) and excise taxes (-30.7%) to the downside, with the latter impacted by the application of stimulus to fuels. Meanwhile, income tax revenues rose 10.4%. Income from government-controlled entities (IMSS and ISSSTE) came in at $83.0 billion (7.8%), while those of CFE reached $58.9 billion (-3.0%). Finally, non-tax revenues declined 27.6%, amounting to $39.9 billion.

[1] The PSBRs include the sum of the Public Balance, the financial requirements of the Mexican Bank Savings Protection Institute, financial requirements of deferred investment projects, adjustments to budget records, financial requirements of the National Infrastructure Funds, program of debtors and the expected gain or loss of development banks and development funds.

Budget spending rises 5.1% y/y. Total spending reached $1,162 billion, $104.4 billion lower than budgeted. In this context, primary spending rose to $1,067.6 billion, implying +12.9% y/y, with financial costs at $94.5 billion (+4.3%). Within the former, the programmable component grew 2.6%, amounting to $848.3 billion. Outlays from government-controlled entities (IMSS and ISSSTE) advanced 9.6%, driven by IMSS at +17.2%. In addition, spending by Pemex fell 1.5%, with CFE higher at 8.8%. We highlight the -1.2% in administrative branches, with strong declines in the Ministry of Finance (-68.5%) and the Agrarian and Urban Development Agency (-67.8%), albeit with increases in Welfare (156.5%) –likely reflecting payments from social programs being brought forward due to the electoral ban– and the Ministry of Labor (36.1%). Moreover, autonomous branches spending fell 10.0%. Inside, the decline is mostly explained by INE (-35.3%) and the Judicial Branch (-5.3%), although higher in the Federal Economic Competition Commission (9.9%) and General Attorney’s Office (7.5%). Lastly, non-programmable spending rose 16.3% to $90.4 billion, with participations –transfers to states under the federal tax collection agreement– up 16.1%.

Lower revenues and expenditures in February. In the month, total revenues fell 5.0% y/y in real terms. Inside, oil-related backtracked 11.3%, despite high prices. Tax revenues came in at -1.4%. Specifically, income tax collection climbed 10.3%, albeit with VAT and excise taxes down 11.0% and 41.8%, respectively. Expenditures declined 1.7%. Programmable spending was lower by 6.4%, with administrative branches at -13.1% and autonomous at -13.4%. Within non-programmable spending, participations rose 8.7%.

The Historic Balance of Public Sector Borrowing Requirements (HBPSBR) stood at $13.4 trillion (~US$646.8 billion). Out of these, $8.9 trillion are domestic debt (66.7% of the total outstanding), with the external component at US$215.6 billion ($4.5 trillion; 33.3% of the total). Net public-sector debt amounted to $13.3 trillion. Inside, net domestic debt reached $8.8 trillion, while net foreign debt totaled US$219.1 billion (equivalent to $4.5 trillion).

[1] The PSBRs include the sum of the Public Balance, the financial requirements of the Mexican Bank Savings Protection Institute, financial requirements of deferred investment projects, adjustments to budget records, financial requirements of the National Infrastructure Funds, program of debtors and the expected gain or loss of development banks and development funds.