Stronger-than-expected peso puts pressure on public finances

The exchange rate at the start of the year is almost one and a half units below that estimated by the Ministry of Finance and Public Credit, a level that according to the agency would generate more losses for public finances than gains; especially due to the loss of income from the sale of oil, which would not compensate for a lower cost of debt service.

On balance, an appreciation of 20 cents in the average exchange rate throughout the year would imply a cut of 4.9 billion pesos in income. In the days so far this year, the exchange rate has moved to an average of 17.8 units per dollar, below the 19.3 expected by the agency in the General Economic Policy Criteria.

The Treasury forecasts are based on assumptions about how public finances will be affected by the movement of some indicators. The exchange rate and the price of the Mexican mix are just a couple of these.

In the case of the exchange rate, the Treasury estimates that throughout the year it will move at an average of 19.3 pesos per dollar. An appreciation of 20 cents in the exchange rate above that parameter would subtract 8.3 billion pesos in oil revenues, while allowing savings of 3.4 billion pesos in debt service.

“An appreciation of the peso against the dollar reduces oil revenues because a high proportion of them is associated with crude oil exports. On the other hand, it reduces the financial cost due to the decrease in the value in pesos of the debt denominated in foreign currency,” he points out.

The fluctuation in the price of oil also affects the balance planned by the Treasury.

Each additional dollar in the price of oil would imply an increase of 11.6 billion pesos in oil revenues, notes the Treasury. Although this indicator had its first days on the decline, it has been appreciating and the Mexican mix is ​​selling on average at 54.7 dollars per barrel, the average reference expected by the Treasury is 54.9 dollars.