Finance Ministry trims spending and reins in the deficit: the adjustment is concentrated in transfers to states and in investment
Mexico’s Ministry of Finance and Public Credit (SHCP) reported that, from January through November, the Public Sector Borrowing Requirements (RFSP)—the broadest measure of the deficit, which captures the government’s financing needs and is covered with debt—fell 19.9% in real terms versus the same period a year earlier. The result was driven mainly by spending coming in below plan (underspending) and, to a lesser extent, by interest and financial costs below what had been forecast, even as rates remain elevated.
According to official figures, for those eleven months the Finance Ministry had scheduled net spending of 8.426 trillion pesos, but actually spent 8.208 trillion. The gap implies underspending of 218.6 billion pesos. In real terms, total spending rose just 2.5% year over year, a pace that points to a late-year slowdown in public outlays consistent with the goal of containing the deficit.
The cut was not evenly distributed. The largest underspending showed up in programmable spending and, within that, in the so-called “general provisions” (ramos generales), which concentrate resources for transfers to states and municipalities. These items often fund local payrolls, education and health contributions, public safety, and social infrastructure. Taken together, they posted a shortfall of 113.4 billion pesos between what was approved/scheduled and what was actually disbursed, suggesting part of the adjustment was pushed onto subnational governments, which rely heavily on federal revenue-sharing transfers and earmarked funds to operate.
Lower outlays were also evident on other fronts. Spending allocated to Mexico’s Federal Electricity Commission (CFE) came in 34.7 billion pesos below plan. Likewise, interest payments and overall financial costs were 54.8 billion pesos under the amount projected, which helped improve the fiscal tallies: the SHCP said the budget deficit was 91.0 billion pesos smaller than anticipated, and the primary budget surplus exceeded the program by 37.0 billion pesos.
In its assessment, the SHCP said the RFSP totaled 1.168 trillion pesos and remained within the ceilings approved by Congress. The agency has reiterated that it aims to bring the deficit down toward about 4.3% of GDP this year and 4.1% in 2026, after 2024 closed at an elevated reading—5.8% of GDP, according to estimates cited by the Center for Economic and Budgetary Research (CIEP)—a factor that has increased scrutiny of fiscal sustainability and the debt trajectory.
The size of the underspending gives a sense of the scale of the adjustment. The reported 218.6 billion pesos is comparable to the cost of large-scale social programs or major investment budgets. In a country where public spending has limited countercyclical capacity, cuts or delays in execution can have visible effects on service delivery, public works implementation, and supplier cash flow—especially at the state and municipal level, where the ability to raise financing independently is often more limited.
The SHCP said the Historical Balance of the RFSP—broadly defined public debt—stood at 51.7% of GDP, slightly below the 52% observed at the end of 2024. It also highlighted that the liability portfolio remains mostly denominated in local currency, at fixed rates, and with long maturities, a mix that reduces vulnerability to exchange-rate shocks and abrupt rate increases. Even so, the accumulated financial cost through November rose 11.2% in real terms year over year, reflecting that monetary conditions remain restrictive: although Banco de México has begun cutting rates from their peak, real rates are still high and debt service competes with other budget priorities.
Looking ahead, Mexico’s fiscal space will face a combination of structural pressures: greater investment needs in infrastructure and energy, rising pension costs, demands for more spending on health and security, and expectations to maintain social programs. In addition, revenue performance depends on economic activity—which has cooled after the post-pandemic rebound—and on tax collection, where enforcement efforts have helped but have not fundamentally changed the country’s relatively low tax burden compared with OECD peers. In that context, underspending can improve the balance in the short term, but it also risks postponing investment or shifting financial strain to states and municipalities, with knock-on effects on service quality and potential growth.
In sum, the November figures show a fiscal consolidation based on slower spending and interest costs coming in below plan, with cuts concentrated in transfers and certain operating items. The challenge will be sustaining deficit reduction without stalling key public investment or placing the burden of adjustment on local governments, as the country navigates a lower-growth cycle and an interest-rate environment that remains demanding.
