IMEF Urges Strict Spending Controls and PEMEX Reforms

An analysis by the Mexican Institute of Financial Executives warns that Mexico must adopt strict public spending controls, expand its tax revenue base, and implement deep structural overhauls at Pemex to safeguard its fiscal stability. The country risks missing its 4.1% GDP deficit target and losing its investment-grade status due to high budgetary rigidity and continuous state oil company losses. Furthermore, recent judicial and regulatory reforms have eroded legal certainty, dampening investor confidence ahead of the critical USMCA trade agreement review.

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Mexico must enforce strict public spending discipline, optimize domestic revenues, and execute deep structural overhauls at PEMEX to restore long-term stability to its public finances, according to an analysis by the Mexican Institute of Financial Executives (IMEF). In its report, IMEF warned that failing to address these deep structural vulnerabilities risks jeopardizing the federal government's target of lowering the fiscal deficit to 4.1% of GDP. The group concluded that reinforcing institutional safety and regulatory clarity remains vital to secure the upcoming renewal of the USMCA and stimulate domestic and foreign investment.

According to IMEF, the core threat to Mexico’s fiscal framework stems from spending rigidity, with approximately 60% of the federal budget permanently committed to fixed, mandatory obligations such as pensions and debt servicing. To cover these expenses, the government is forced to expand public borrowing. The effects of this borrowing were keenly felt during the final year of the Andrés Manuel López Obrador administration in 2024, when subsidies, transfers, and highly expensive infrastructure projects grew at double-digit rates in real terms, pushing the fiscal deficit to nearly 6% of GDP. 

Even with spending cuts, the Public Sector Borrowing Requirements only dropped to 4.8% of GDP due to slower economic growth and continuous bailouts for PEMEX. IMEF projects that the deficit will remain at 4.8% this year, causing the government to miss its stabilization target and increasing the risk of losing its investment-grade status entirely.

To mitigate these risks, IMEF recommended reviewing the public expenditure framework, establishing strict cost-benefit criteria for infrastructure works, and putting new social programs on hold. The group noted that tax collection remains stagnant, with Income Tax (ISR) revenues contracting 5.8% in real terms through May due to a drop in formal employment and lower investment. This leaves the treasury overly reliant on Value-Added Tax (IVA) and Special Tax on Production and Services (IEPS) revenues, which are highly sensitive to economic deceleration.

Furthermore, IMEF characterized the government's push for energetic sovereignty as an erroneous vision, noting that PEMEX accumulated approximately US$100 billion in losses between 2019 and 1Q26. Refining domestic gasoline costs the company at least US$10 billion annually in losses covered by the treasury, resources that could otherwise fund profitable crude extraction. In light of these returns, the group recommended halting operations at loss-making refineries, refocusing on exploration, and reducing a workforce that has remained unchanged for eight years despite persistent financial deficits. 

Finally, the report noted that the recent judicial reform, the disappearance of autonomous regulatory bodies, and a loss of confidence in the Tax Administration Service (SAT) due to constant rule changes have severely damaged legal certainty, collapsing investor sentiment as reflected in recent INEGI statistics.

IMEF’s call for rapid structural adjustment comes as global credit markets demonstrate mounting institutional concern over Mexico's long-term fiscal viability and rising debt leverage. In May 2026, Moody's Ratings downgraded the sovereign credit rating to Baa3, positioning the country at the lowest tier of investment grade. The credit agency highlighted that rigid spending models, a narrow tax base, and recurring financial support to state-owned enterprises limit the government's capacity to stabilize its debt burden. 

This downgrade followed a separate action by S&P Global Ratings that month, which revised Mexico’s credit outlook to negative. In its release, the agency warned that sluggish fiscal consolidation and lower economic growth risk accelerating the net general government debt to 54% of GDP by 2029.