MEXICO CITY: Mexico’s Finance Ministry said on Tuesday that it will propose using some $2.1 billion in extraordinary funds from the Bank of Mexico for infrastructure projects in 2016, cushioning the effects that next year’s planned budget cuts will have on investment.
Any money that the Bank of Mexico has left over from its operations is by law transferred to the treasury as extraordinary revenue, since the central bank is a nonprofit institution. In 2014, the Bank of Mexico had a remainder of 31.4 billion pesos ($2.1 billion). The funds don’t include any of the country’s foreign reserves, which currently stand at $195.6 billion.
The ministry said in a statement that it intends to earmark the money for infrastructure projects in 2016, when additional budget cuts are planned in response to low oil prices. The money would be used mostly for projects developed under public-private partnerships.
The drop in crude oil prices and prospects of more difficult global financing conditions when the U.S. Federal Reserve starts raising interest rates led the government to cut 124 billion pesos ($8.1 billion) from the 2015 budget, and to lower 2016 spending plans by an additional 135 billion pesos. Oil and related fees account for about 30% of Mexican budget revenue.
The spending cuts, which combined equal about 1.5% of gross domestic product, aim to narrow the fiscal deficit without raising taxes.
President Enrique Pena Nieto has until Sept. 8 to submit his 2016 budget proposal to Congress.
In a preliminary outline published last month, the Finance Ministry projected a fiscal deficit next year of 3% of GDP, down from an expected 3.5% in 2015. The budget outline projects GDP growth between 3.3% and 4.3% in 2016, compared with the government’s current 2015 estimate of 3.2% to 4.2%.
