Mexico's FEIP Drops 88% Since 2018

Mexico's Stabilization Fund (FEIP) recorded a balance of MX$40.52 billion in 2023, representing an annual real contraction of 88.8% compared to 2018 when it stood at MX$279.77 billion, according to data from the Ministry of Finance and Public Credit (SHCP).

The depletion of the FEIP has been accelerated during the current administration, notably in 2020 when the COVID-19 pandemic caused global and national economic crises. By the end of 2020, the FEIP's balance stood at MX$9.49 billion, marking an annual decline of 94% in real terms.

The FEIP accumulates resources from various sources, including the surplus of operations from Mexico’s Central Bank (Banxico), transfers from the Mexican Oil Fund (FMP), surplus resources from budgetary revenues, risk management coverage, and financial returns from investments, according to the Center for Economic and Budgetary Research (CIEP).

To address this, Congress recently approved amendments to the Federal Budget and Fiscal Responsibility Law to introduce new revenue sources for the FEIP. These amendments allow for the allocation of savings from the financial cost of public debt to the FEIP and authorize additional contributions in the form of financial assets or credit securities from the federal government.

“This reform does not guarantee a recurring income, and once again, we will be left at the mercy of what can be allocated to this stabilization fund. This weakness is not corrected, and public finances continue to be vulnerable to adverse situations that may arise,” says Jorge Cano, Researcher, Mexico Evalúa.

Diego Díaz, Economist, Mexican Institute for Competitiveness (IMCO) supported the amendments, acknowledging that they address the critical issue of insufficient funds in the stabilization fund. However, he noted that “the proposed resources, such as financial assets, savings, or reductions in debt financing costs, will be subject to the executive's discretion if they decide to allocate resources to the fund.”