Payment of interest on public debt was lower than expected

Mexico City. Spending on public debt interest increased by 5 percent during the first half of the year, Given the environment of restrictive financial conditions and volatility; although overall this item reflected savings of more than 36 billion pesos compared to what was projected by the Ministry of Finance and Public Credit at the beginning of this year, the federal agency reported.

According to reports submitted to Congress, during the first half of 2024, 607,995.4 million pesos were allocated to the payment of interest on public debt, which represented a 5 percent real increase compared to the 553,268.2 million pesos reported in the comparable period last year.

However, so far this item reflects savings of 36,434.6 million pesos, given that the program estimated 644,430 million pesos for this item. According to the Undersecretary of Finance, this lower than projected expense on debt interest is due, in part, to savings on the liabilities of Petróleos Mexicanos (Pemex) and to the federal government’s refinancing strategy.

The financial cost of the public sector was lower than planned because the internal cost is 21 billion pesos lower and the external cost is 15 billion pesos lower. Part of this saving is due to Pemex, because it no longer contracts debt, and another part is due to the federal government due to the refinancing strategy.explained to this medium the Undersecretary of Finance, chaired by Gabriel Yorio.

The dynamics of the movements in the financial cost reflect the refinancing strategy carried out by this administration, which involved reducing external debt positions and reducing the weight of the obligations of the State’s productive companies, especially Petróleos Mexicanos (Pemex) to seek financing through the federal government.

The data show that while the financial cost of obligations in Mexican currency has increased by 9.5 percent, that of external obligations has accumulated a fall of 9.1 percent. In addition, the interest expenses of federal government liabilities increased by 10.7 percent annually in the first half of the year and those of productive companies, including Pemex, fell by 23.2 percent.

Even with the savings reported in the first half of the year, the financial cost of the debt absorbed resources like never before. The 607,995.4 million pesos allocated to pay the liabilities of public obligations are close to doubling in nominal terms the 331,772.3 million pesos allocated to this concept during the first half of 2018.

Driven by the increase in interest rates and the contracting of debt – but not above what was approved by Congress – the financial cost of the debt has increased by 38.6 percent in real terms between the first half of 2018 and the comparable period of 2024, while the total public debt has increased by 23.3 percent.