Mexican Government Cuts 2016 Budget by $13 Billion amid Slumping Oil Prices

Latin American Herald Tribune: The government is cutting the 2016 budget by 221 billion pesos ($13.12 billion) to maintain economic stability amid a challenging global situation, Mexican Finance and Public Credit Secretary Luis Videgaray said.

“The spending planned in the budget for the year 2016 reflects a reduction of 221 billion pesos ($13.12 billion), that is 1.15 percent of the gross domestic product (GDP) less than in the planned spending for last year,” Videgaray told Congress.
The proposed 2016 federal budget unveiled on Tuesday calls for net spending of four trillion pesos ($282.15 billion), Videgaray said.

“More than half of the adjustment is already being implemented” as part of President Enrique Peña Nieto’s “austerity budget” for dealing with “the needs” and “the reality” of the “national economy,” the finance and public credit secretary said in a press conference after the presentation of the budget.

The government announced in January that it was cutting spending by 124.3 billion pesos ($7.41 billion) due to the collapse of oil prices.

The 2016 budget “was prepared using a different methodology” than in prior years so that “each and every one of the government agency investment projects and programs was reviewed based on their own merits,” as well as their “efficiency” and “effectiveness,” Videgaray said.

The budget presented to lawmakers calls for reducing the 2016 budget deficit from 1 percent of GDP to 0.50 percent of GDP and lowering “the public sector’s financing requirements from 4.1 to 3.5 percent,” Videgaray said.

The government’s “principal goal, in light of the situation in the global economy, is to preserve the stability” of the Mexican economy “based on the principle of responsibility and taking into account the fundamental objective of protecting the economies of Mexican families,” Videgaray said.

The government has been working to reduce the Treasury’s dependence on revenues from petroleum sales, the finance and public credit secretary said.

Non-petroleum revenues hit a “historic high” of 13 percent of GDP in the first half of 2015, while “it was 8 percent barely a few years ago,” Videgaray said.

Dependence on petroleum revenues for budget purposes fell to 18 percent of GDP in the January-June period, down from 39 percent of GDP in 2011, the finance and public credit secretary said.