Due to the covid-19 pandemic, the war in Ukraine and increases in the reference rate in the United States, the Mexican central bank has raised its reference rate 15 times, since June 15, 2021, when it raised it from 4% to 4.25%, today Thursday Banxico raised it to a record high of 11.25%.
The SHCP reports that 80% of the debt is in Mexican pesos, which directly affects the payment of interest on the national debt. The rest is in foreign currency, mainly dollars.
The sustained increase in interest on the debt is mainly due to three factors: the constant increase in the budget deficit; the high interest rates in Mexico and the exchange rate in recent years, according to information from the Center for Economic and Budgetary Research (CIEP).
Added to the pressure to pay debt service are unavoidable expenses that grow every year, such as life and non-life pensions, leaving less money for investments. In this regard, it should be noted that investment in (physical) infrastructure barely grew 0.6 Annual real % in January-February.
Meanwhile, the cost of pensions grew 1.2%, distributing 224,053 million pesos, for this concept. Participations to the states fell 6.8% annual real.
