Mexico is expected to spend MXN 575bn ($28bn) in 2022 on subsidies and stimulus programs, which have been implemented by the government to fight inflation. Inflation has spiked to 8.16%, its highest level in 21 years and would have been 2.6% higher without the subsidies, according to the government. The measures range from fertilizer handouts and ensuring consistent food supply to the cornerstone of the strategy – capping energy prices by introducing gasoline and electricity subsidies. Finance Minister Rogelio Ramirez de la O said, “The resources that are going into this package could not have had any better use”. Bloomberg notes that these subsidies are mainly funded by higher revenues from crude oil exports. However, the higher revenues will likely not be able to adequately cover the full projected cost of the subsidies, missing the mark by $3bn. Nonetheless, Mexico expects public tax revenue to be about 1.1% of GDP above budget, which it will spend to meet the fiscal deficit target for 2022.
Mexico’s bonds are generally trading lower, with its 7.5% 2033s trading at 121.34, down by 2.09 points to yield 4.91%.
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