Mexico needs more effort to lower debt, IMF says

By Diego Oré and Raul ‌Cortes

MEXICO CITY, ​Oct 2 (Reuters) - ​The International Monetary Fund said on Friday that greater efforts are needed to put Mexico's debt on a declining trajectory, even ‌as fiscal consolidation continues in 2026, following an Article IV consultation ⁠mission to Mexico City in September.

The fund projected Mexico's economy will grow 1.5% in 2026 ‌and 1.8% in 2027, though ‌growth remains constrained mainly by external uncertainty, and called for monetary policy to maintain a moderately tight stance to lock in disinflation.

• Revenue mobilization, ​better spending prioritization and greater private sector involvement are needed to protect growth-enhancing investment, the IMF said.

• Headline inflation is near the central bank's ⁠target, though core price pressures and inflation expectations remain elevated, the IMF said.

• The IMF warned that geopolitical ​tensions and the effects of El Niño could add pressure to prices and delay a durable return to Banxico's 3% ​inflation target until early 2028.

• Banxico held ‌its benchmark interest rate at 6.50% in September and expects inflation to return to its 3% target in the fourth ⁠quarter of 2027, though risks remain tilted to the upside.

FISCAL POLICY

• The IMF said Mexico's draft 2027 budget entails a more gradual fiscal consolidation than previously announced and an ⁠upward debt trajectory in coming years.

• Mexico's financial system is sound, but improvements to anti-money ​laundering and counter-terrorism financing frameworks and deeper financial intermediation are needed, the fund added.

• According to the IMF, raising potential growth in Mexico requires closing infrastructure gaps, reducing regulatory ‌burdens and strengthening trade integration, according to the IMF.

• Improving security, combating corruption and lowering informality were also cited as ‌necessary to lift growth potential.

• Mexico's 2027 budget projects public debt rising to ⁠55.0% of GDP from an estimated ‌54.0% at the end ​of 2026, even as the government continues its fiscal consolidation efforts.

(Reporting by Diego Ore; Writing by Raul Cortes Fernandez, Editing by ‌Natalia Siniawski)

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