Mexico: Selected Issues

Concluding Remarks

This note analyzed the recent fiscal reforms, which can make the fiscal frameworkmore instrumental in addressing challenges that Mexico will likely face in coming years.Mexico would benefit from building of fiscal policy buffers to reduce the exposure to high financingand hedging costs during periods of global uncertainty, improving flexibility to implementcountercyclical fiscal policies, and addressing long term fiscal challenges associated with a reductionin oil revenue and an increase in health and pension spending. Introducing an additional target onthe public sector borrowing requirement in the Fiscal Responsibility Law will make the fiscal rulemore transparent and enhance its credibility, and the new structural current expenditure growth capwill help reducing procyclicality in its fiscal framework by restraining expenditure in periods ofunusually high revenues. The reforms to mobilize tax revenue are also encouraging initial steps toimprove the management of oil wealth and reduce the public sector dependence on oil revenueover the medium term. Looking forward, Mexico could consider a modification in the design of theoil stabilization funds that would allow for simpler revenue transfer rules and operations.