Financial cost of the debt exceeded what was programmed in the first quarter of 2022

The financial cost of the debt, which refers to the payment of interest, commissions and expenses related to it, was 2% higher than programmed in the first quarter of the year, in the midst of an environment in which central banks around the world , have had to tighten monetary policy to deal with the high levels of inflation reported in recent months.

According to the latest report presented by the Ministry of Finance and Public Credit (SHCP), in the first three months of the year the financial cost of the debt reached 164,279 million pesos, which represented a growth of 5.5% compared to the same period of the previous year.

The resources that the government allocated to the financial cost of the debt were 3,263 million pesos higher than expected, an amount higher than the expenditure that was allocated, in the same period, to physical investment in health where resources were used for 2,848 million pesos, in the first three months of the year.

When separating the financial cost of the internal and external debt, it was observed that it is in the first where an increase was observed. Treasury data showed that in the first quarter the internal financial cost increased 16.2%, while the external cost presented a decrease of 3.1 percent.

Goodbye low rates

“An environment of low rates is over. Central banks at the international level, from the most advanced economies, have already begun to increase their reference rates and in Mexico it has not been the exception, Banco de México (Banxico) has made adjustments to its interest rate so far this year”, declared Gabriel Yorio, undersecretary of the Treasury.

During the Covid-19 pandemic, most central banks lowered their interest rates, a moment that the Mexican government took advantage of to refinance debt in the markets at a lower cost; however, this has been reversed in recent months due to the high levels of inflation that different nations have had to deal with.

In Mexico, for example, consumer inflation reached a level of 7.68% in April, the highest since January 2021.

In this vein, at this month’s monetary policy meeting, Banxico increased its interest rate by 50 basis points, leaving it at 7.00 percent.

It will exceed what was approved in the PEF

It is expected that this year, given the high levels of inflation and the tightening of monetary policy, the financial cost of the debt exceeds what was approved in the Federal Expenditure Budget (PEF), in accordance with the Pre General Policy Criteria Economy 2023.

In the approved PEF 2022, the agency recorded an expense of 791,463 million pesos for the financial cost item; however, in the Pre Criteria 2023 it now provides for an amount of 869,337 million pesos.

In this way, the government of Andrés Manuel López Obrador is estimated to allocate an extra 77.873 million pesos to those approved this year.

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