Economics: Strong public finance data cannot hide major risks ahead
Public finance’s medium term outlook has emerged as a major source of public debate with last week’s passage of the López Obrador administration’s federal spending bill (FSB) for 2023 and the release of public finance results as of September, which appear solid on the back of strong revenue growth and a continuing primary surplus. But underlying such strength are a series of transitory factors such as high oil prices and the considerable contribution they make to the government coffers. Moreover, the Tax Authority’s very aggressive approach to tax collection continues to deliver considerable revenues from that source, but it appears unlikely that bonanza will endure much longer.
Next year, public finance will run up against greatly reduced slack that will also coincide with a global economic slowdown or possible recession. This, in turn, will directly impact the Mexican economy and tax revenues at a time of mounting pressures on the spending side of the ledger, as well. In that context, diverse analysts have grown concerned by the Chamber of Deputies' adopting at the beginning of the month changes to the Budget and Fiscal Responsibility Law (BFRL) regarding the sources of funding for the Budgetary Income Stabilization Fund (BISF). Under these changes, the Finance Ministry could make additional contributions in the form of financial assets, and also, in the event that during the corresponding fiscal year savings or budgetary economies are registered in the financial cost of federal government debt, compensatory budgetary contributions could be made to the Fund and later be used as the Finance Ministry sees fit.
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