Mexico Debt Decreased 1.2% Annually and GST Stability at 48

The Historical Balance of the Financial Requirements of the Public Sector SHRFSP the debt in its broadest measure registered as of September of this year a balance of just over 126 trillion pesos which represented a decrease of 12 in comparison with the same month last year according to the latest data released by the Ministry of Finance and Public Credit SHCP.

At the same time it was possible to take advantage of the low interest rate environment to improve the cost of financing.

In the third quarter of 2021 the government carried out different operations to refinance its debt and face current market conditions both in the foreign and domestic markets which has allowed it to change debt payment terms and thus have liquidity

In addition to certain swaps made by the Treasury in the third quarter the creation of the Bondes F stood out which began to replace the Bondes D in order to have more liquid references

This new instrument is referenced to the Interbank Equilibrium Interest Rate TIIE of funding at one business day which is published by the Bank of Mexico Banxico

In recent months it was reported that Banxico was working hand in hand with the SHCP so that debt issues would use the new funding TIIE as the reference rate for their operations.

In this way the SHRF was located at 485 of the Gross Domestic Product GDP This for the Treasurys consideration is consistent with its estimate for the end of the year of 51 lower than the level of 524 that was registered at the end of 2020

The public debt maintains a sustainable path without exceeding the debt ceilings approved by Congress indicated the agency in charge of Rogelio Ramírez de la O

Last year the crisis caused by Covid19 impacted the SHRFSP which reached a historic level due to the contraction of the Mexican economy and the depreciation of the peso against the dollar.

Now with the recovery of the economy and a more stable exchange rate the dependency expects the debt to remain at a level of 51 not only this year but until 2027 that is even for the next six year term

The SHRFSP takes into account the debt of the budgetary public sector plus the financial obligations of the Institute for the Protection of Bank Savings IPAB and the debtor support program

The actions carried out during the third quarter of 2021 have focused on financing the financial needs of the Federal Government at the lowest possible cost and a low level of risk given the conditions of the financial markets in addition to promoting efficient liquidity management Hacienda explained in its report

The Treasury stressed that during the pandemic Mexico has had permanent access to international and local markets which has allowed the government to cope with the volatility that occurred in the markets during that period

This TIIE was created in line with the appearance of new reference rates at the international level in order to avoid their manipulation in the face of the scandals surrounding Libor rates

Faced with this controversy the central banks of various countries published their new rates to replace the Libor rates at the end of this year

When breaking down the Mexican debt it was observed that the internal and external balance presented different behaviors in the month where the former registered an increase while the latter decreased

In the case of the internal balance which includes financing obtained in the domestic market through the placement of government securities and direct loans with other institutions in pesos it was located at 83 trillion pesos 91 higher than in September of last year

This increase was understood as the increase in budget debt that is that contracted by the federal government as well as public organizations and companies In September it added just over 74 trillion pesos 117 more in annual comparison

For its part the external balance that refers to the debt contracted with foreign financial entities and that are issued in a currency other than pesos was located at 42 trillion pesos 168 less than its level in September 2020

In the interior it was observed that all its components showed decreases in the period being debt of the Development Bank and Funds and Trusts are found the one that decreased the most with a rate of 186 percent hundred.

Jay Bradi

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