The crash in oil prices and economic uncertainty took their toll on Mexico today in the form of budget cuts and postponement of the high-speed México City-Querétaro train project.
Finance Secretary Luis Videgaray told a press conference that federal spending for this year will be cut by 2.6%, or 124.3 billion pesos (US $8.3 billion).
The drop in oil prices — oil revenues fund about one-third of the budget — has put pressure on federal finances as well as the peso. Dropping oil output at Pemex hasn’t helped: production this month has been the lowest since 1995 at 2.235 million barrels a day. The government’s estimate of output for the year is 2.4 million barrels daily.
Of the total spending to be cut, 52 billion pesos will be absorbed by the administration, 62 billion by Pemex and 10 billion by the Federal Electricity Commission.
Another train project is also affected by the revised spending plans: the Quintana Roo transpensinsular train has been canceled. However, the new México City airport will go ahead as planned.
Videgaray said the reduced expenditures will have a marginal impact on economic growth, but the government is sticking to its GDP growth forecast of 3.2% to 4.2% for the year.
Programs such as Prospera, housing subsidies and payments to universities will not be affected, but mid and senior-level civil servants will take a 10% pay cut. The free TV sets being handed out in preparation for switching to a digital service will also be cut back: the number of sets to be given away will be cut from 13 million to 10 million.