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Mexico's budget needs to balance weak growth, fiscal discipline

09 September 2019 02:24 (UTC +04:00)

The Mexican government’s 2020 budget will have to strike a careful balance, weighing the realities of slowing economic growth and dwindling income with commitments to fiscal discipline, APA reports citing Reuters.

Market watchers, credit ratings agencies and investors will pore over the budget proposal when Finance Ministry officials present it to the Lower House of Congress on Sunday evening for guidance on President Andres Manuel Lopez Obrador’s spending priorities for Latin America’s second-largest economy.

Finance Minister Arturo Herrera previewed the budget blueprint on Saturday by highlighting three priorities he said will see more funding: social welfare programs, the new National Guard security force as well as heavily indebted state oil firm Pemex.

“It will be an extraordinarily responsible budget,” he said, stressing that the government is being careful with public spending.

“We recognize the limits of fiscal policy.”

Mexico’s central bank, meanwhile, has underscored in its most recent statements that next year’s budget must “generate confidence.”

Lopez Obrador, a leftist nationalist who won a landslide election victory last year, has promised another austere spending plan with no new taxes, tax increases or gasoline price spikes beyond inflation.

But the government has limited room to cut from programs after it reduced funding for several ministries in order to centralize spending, fight public sector corruption and honor a campaign pledge to implement fiscal austerity in its first budget in December.

Mexico’s hospitals, the immigration service and shelters for victims of domestic violence were among the services hit by the steep budget cuts.

“We have to recognize that we have a serious income problem, we have the decision and commitment of maintaining a surplus, of fulfilling the financial obligations of the Mexican state,” said Alfonso Ramirez Cuellar, who chairs the budget committee in the Lower House.

Falling oil production and prices, as well declining resources from income and value-added taxes as Mexico’s economy barely escaped entering a recession, have meant lower government resources, said Ramirez Cuellar, who is also a member of Lopez Obrador’s leftist National Regeneration Movement (MORENA).

He said the government’s spending priorities next year will include the key energy sector, health, education and beefing up the National Guard, a new security force created by Lopez Obrador to bring down record homicide rates.