Containment of spending at Pemex disadvantages public finances: BBVA

Mexico City. The constant containment of public spending in Petróleos Mexicanos (Pemex), so far, does not seem to be the proposal that the government needs to make to maintain the fiscal discipline that has remained throughout this government and that has been highlighted by various international organizations. , stated BBVA Mexico.

“The continued containment of spending at Pemex does not appear to be a sustainable strategy to maintain fiscal discipline in a context of greater social spending pressures and the absence of fiscal reform,” said the bank’s economic studies area in an analysis of the situation. of public finances.

The financial institution indicated that at the end of the first quarter of the year, total spending was lower than planned, mainly due to lower expenditures by productive companies (Pemex and the Federal Electricity Commission) as well as the Mexican Social Security Institute (IMSS). and the Institute of Security and Social Services for State Workers (ISSSTE).

He specified that the expenses of companies and public health organizations were lower than what was programmed in the budget by 47,784 million pesos and 37,119 million pesos, respectively.

Meanwhile, he said, during the first three months of the year, total spending showed a real annual variation of 18.8 percent due, mainly, to the significant increase in subsidies, transfers and contributions, which registered a real annual increase of 64 percent. hundred.

For its part, oil revenues, which are those that also include Pemex’s own income, contributed to a greater extent to the total income being lower than that of the program in the reference period.

And in turn, BBVA noted, non-oil revenues contributed 3.2 percentage points to the real annual increase of 2.4 percent in total income between January and March, while oil revenues subtracted 0.8 percentage points from said increase.

In this way, the bank said, the primary balance in the first quarter was 243 thousand 264 million pesos above the primary deficit goal for 2024, the highest deficit that the current government has presented and that various specialists consider will be the first challenge that the next government faces.

It should be remembered that the primary balance is the difference between the government’s income and expenditure. If the figure is positive, it is considered a surplus; if it is negative, it is a deficit.

“Despite the lower budget income with respect to the program of 4 thousand 73 million pesos, the lower budget expenditure of 122 thousand 20 million pesos and the balance of entities under indirect budget control of 15 thousand nine million pesos had a favorable impact on the performance of the public balance observed in the first three months of the year,” BBVA said.

He pointed out that, although gross debt increased by 2.7 percentage points of GDP, the expected growth for nominal GDP in 2024, the increase in budgetary assets and the appreciation of the peso against the dollar contributed 3, 1 and 0.1 percentage points of GDP, respectively, to the fall in the historical balance of the financial requirements of the public sector (the broadest expression of debt) between December 2023 and March 2024.

“The reduction in the historical balance of the financial requirements of the public sector between December 2023 and March 2024 is explained by the falls of 0.8 and 0.5 percentage points of GDP in the internal debt and external debt components, respectively,” added the bank.