Mexico’s public debt has reached record levels, with the government spending approximately $129 billion on debt servicing from January to August 2024. Despite allocating fewer resources than planned, the cost of servicing debt has increased by 4.0% compared to the previous year.
Various factors, including global economic conditions, have contributed to the surge in debt servicing costs. Domestic currency debt payments have risen by 9.3%, while foreign currency debt payments have decreased by 9%.
The rising cost of debt servicing poses a significant challenge to Mexico’s public finances, limiting fiscal space for other priorities. With high inflation rates prompting central banks to increase interest rates, the government anticipates the financial cost of debt to decrease to $220 billion in 2025, consuming a larger portion of the budget.
The Center for Economic and Budgetary Research emphasizes the need for measures to stabilize public finances and ensure sustainable economic growth. While lower interest rates may help reduce debt servicing costs, additional strategies are required to lower the deficit and manage the debt burden effectively.
As the government navigates these challenges, the allocation of savings to the Budget Revenue Stabilization Fund will provide a financial cushion for unforeseen events, critical for Mexico’s economic stability and growth in the years ahead.