Mexico | Oil windfall income will not compensate the loss of excise taxes on fuels in 2022

The Ministry of Finance estimates that the loss of revenue collection from excise taxes on fuels will be around MXN 421,600 million (1.5% of GDP) and oil-related income will be MXN 368,710 million (1.3% of GDP) above budget. Consequently, this windfall income will not be enough to compensate the revenue loss of the former.

Key points

• Key points:
• Nevertheless, the government expects total public revenue to be MXN 313,742 million (1.1% of GDP) above budget, an amount that the government will spend to meet the public deficit target for 2022.
• In particular, the government will increase spending above budget on financial investment, pensions and revenue sharing with states, financial costs and other expenditures. The share of these items as a percentage of total spending above budget is 25.3%, 6.4%, 23.2% and 45.1%, respectively.
• These percentages reveal that the highest pressures on public spending in 2022 are coming from financial investment and financial costs of public debt, which do not come as a surprise given the federal government policy of making equity contributions to Pemex and the increments of global interest rates.
• Even though is convenient that the government makes these contributions to pay for amortizations of Pemex’s financial debt, this strategy could be more difficult to implement under a scenario characterized by lower global economic growth, persistence of high inflation levels and the resulting higher pressure on social spending.

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