(Bloomberg) -- Mexican Finance Minister Arturo Herrera told ruling party lawmakers that next year's budget will be tighter as the government seeks to rein in debt after steep losses in the peso this year, news site El Universal reported.
Herrera told lawmakers from President Andres Manuel Lopez Obrador's Morena party in an online meeting that the government would burn through emergency funds this year to offset the drop in government income due to the impact of the Covid 19 crisis, El Universal said.
Key highlights from the meeting:
- The government's hedge for oil next year would only lock in protection for about 22% less than this year's oil income due to the drop in energy prices
- The government didn't have much room to increase bond placements after debt as a percentage of gross domestic product expanded by as much as 10% this year due to peso weakness
- The government will “send a budget that is very cautious, prudent and very responsible and that will require the understanding and solidarity of many because there will be fewer resources in the budget compared to what we sent for this year and in what there was in at least two previous fiscal years”: Herrera
While government coffers were padded by a crackdown on tax evasion early this year, a sharp drop in income from state oil company Petroleos Mexicanos and lower tax collection due to the economic slump from the outbreak has hit federal revenues.
Lopez Obrador has refused to increase debt issuance to fund significant fiscal stimulus as the country sinks into what analysts project will be the deepest recession since the Great Depression. The peso has fallen 9.5% since the start of the year, the third-worst performer among major currencies tracked by Bloomberg.
Finance ministry press officials said there isn't an official transcript of Herrera's comments since the event was private. The government is set to submit its 2021 budget to lawmakers by a Sept. 8 deadline.
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