Moody’s Warns Mexico Debt Poses Credit Rating Risk

Mexico’s federal government debt could rise to levels that threaten its investment-grade rating, Moody’s Ratings has warned.

Renzo Merino, vice president and senior credit analyst in Moody’s sovereign risk group, said the debt burden is projected to increase to between 45% and 50% of GDP by 2027, excluding the liabilities of state-owned oil company Pemex.

“Our base scenario indicates that the debt burden will approach 50% of GDP toward 2027–2028, depending on the degree of fiscal consolidation,” Merino said at the Inside LatAm: Mexico 2025 forum.

According to the Finance Ministry, net federal government debt stood at 44.4% of GDP as of July. Merino noted the ratio rose by around 5 percentage points in the last year alone and cautioned that maintaining the debt is costly.

Moody’s currently rates Mexico at Baa2, two notches above speculative grade. Merino highlighted that Mexico spends roughly 17% of government revenues on interest payments—well above most peers with similar credit ratings.

“The problem for Mexico is that maintaining this debt is expensive. The high interest burden limits fiscal space for infrastructure, education, health, and other areas,” he said.

He also pointed to structural challenges in Mexico’s public finances, including rigid spending, Pemex’s strained finances, and rising social transfers.