By Anthony Harrup / Wall Street Journal
Mexico’s government will cut planned spending by about $8.3 billion this year to cushion the effects of plunging oil prices and adverse global economic conditions, while postponing a controversial high-speed train.
Finance Minister Luis Videgaray said the cuts were a preventive measure to protect public finances against economic headwinds, as oil and related taxes account for about 30 percent of federal government revenue. Mexico also needed to confront the prospect of higher interest rates in the U.S., he added.
“We’re adjusting public spending to have lower financing needs in domestic and international financial markets, in a situation where with higher interest rates, and the drop in oil prices, financing will become more difficult to obtain,” Videgaray said at a news conference.
The measures seek to boost investor confidence and tackle concerns that Mexico could be tempted to relax fiscal discipline ahead of midterm elections in July. Despite two decades of macroeconomic stability, some economists have grown concerned about an increase in government borrowing since the global financial crisis in 2009.