(Bloomberg) -- Mexico's plan to tap a $12 billion windfall from the International Monetary Fund to repay public debt will need time before it can be carried out, Finance Minister Rogelio Ramirez de la O said in an interview.
“It's not really around the corner,” Ramirez said by phone late Wednesday. “It's something that needs to be worked out in much greater detail than we can say we have done so far.”
In his first interview since being ratified by congress last month, Ramirez said his ministry hasn't made a formal request to the central bank for the funds, and has yet to target any specific debt issuance for repayment.
The government is in informal consultations with Banxico, as the central bank is known, after concluding that leaving the IMF injection as international reserves is probably not the greatest use of the extra liquidity, the minister said.
President Andres Manuel Lopez Obrador has been pledging for weeks to repay debt with the latest issuance of IMF's so-called special drawing rights, or SDRs, which are allocated to member countries based on their share in the Washington organization. The nation's central bank says Mexico can only use those funds, which were transfered last month as part of efforts to help countries amid the pandemic, if it purchases them from the bank.
Read More: Mexico Would Have to Buy Reserves to Pay Debt, Banxico Says
Lopez Obrador said Monday that a debt refinancing had begun, without providing further details. His spokesman Jesus Ramirez told Bloomberg News that Pemex's debt is the target of the deal.
External Debt
AMLO, as the president is known, wants to use the additional liquidity to repay the most expensive or external debt, Ramirez de la O, a longtime ally of the president, said in the interview, adding that there are still formal procedures to meet.
“We are considering asking the central bank whether it wants to accumulate such an additional balance into the international reserves,” Ramirez de la O said. “Whenever we find a procedure to follow, it will be in close consultation with the bank, and it will have to be a feasible procedure.”
Separately, the minister also said that inflation gains are temporary, and driven mainly by base effects and some supply constraints rather than high demand. While Mexico's annual inflation eased in August, in part due to the government's price controls on cooking gas, it has remained above the central bank's 4% target ceiling since March.
Ramirez de la O added that the $55.10 per barrel of oil projected in his 2022 budget proposal submitted to congress earlier on Wednesday is a conservative target and that crude prices are likely to stay above that figure.
The finance chief said his decision to buck previous projections for a primary budget surplus in 2022 and opt for a small 0.3% deficit, stems from pragmatism, and the expectation that faster growth will lead to higher revenue. The budget sees Latin America's second-largest economy growing 4.1% next year, above the 3% estimated by economists.
Read More: Mexico Proposes Slight Easing of Austerity in 2022 Budget
Increases in health spending, social programs and investment programs are “driving expenditure to realistic levels,” he said. “It's more the outcome of what events dictate rather than ideology.”
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