Mexico's election year deficit plan fuels fear over finances
By Dave Graham and Diego Oré
MEXICO CITY (Reuters) — The Mexican government's plan to run up the biggest budget deficit in decades during the 2024 general election year could put pressure on public finances and eventually threaten its credit rating, analysts said on Monday.
In its budget plan, the government on Friday forecast the deficit would widen from 3.3% of gross domestic product (GDP) this year to 4.9% next year as the country gears up to elect a successor to President Andres Manuel Lopez Obrador.
Much of the added spending will cover bigger outlays on social programs and funding for Lopez Obrador's flagship infrastructure projects, in particular the so-called Mayan Train, a major new railway in southeastern Mexico.
He has so far kept spending in check by slimming down parts of the state he sees as superfluous and curbing public sector pay, but is loosening restrictions heading into the election.
«It's a very electoral budget,» said Patricia Terrazas, a member of the opposition center-right National Action Party (PAN) who sits on the lower house of Congress finance committee.
Lopez Obrador last week backed former Mexico City Mayor Claudia Sheinbaum as his party's candidate to succeed him. Mexican presidents can only serve a single six-year term.
Historic data show the projected budget deficit for 2024 will be the highest since 1988 as a proportion of GDP.
Mexico's 10-year bond yield rose 17 basis points on Monday, reflecting what analyst Gabriela Siller of Banco Base said were expectations about the prospect of higher borrowing.
Still, the peso currency strengthened over 1.5% against the dollar, leading a rise in Latin American currencies.
With the central bank's benchmark interest rate at 11.25%, Mexico's
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