Mexico’s Government Debt Crosses 60% of GDP for the First Time in 20 Years — and the IMF Says It Will Stay There

Mexico cut spending and still crossed the 60% debt threshold. The explanation is simple: when you subsidize gasoline at 7 pesos per liter while oil trades above $100, the savings evaporate before they reach the balance sheet.

Mexico debt relative to GDP broke a two-decade ceiling in 2025 and will not come back below it, according to the IMF’s Fiscal Monitor released Wednesday at the Spring Meetings. The Rio Times, the Latin American financial news outlet, reports that the general government debt—the broadest measure, which includes Pemex, development banks, and social security alongside central government bonds—reached 60% of GDP under President Claudia Sheinbaum’s first year and is projected to climb gradually to above 63% by 2031.

Two Definitions, One Problem

The IMF uses two debt metrics for Mexico that tell different stories at different speeds. The narrower central government measure—which the government itself emphasizes—shows debt rising gradually to 54.1% of GDP by 2029, a trajectory that looks manageable. The broader general government measure, which includes Pemex’s massive obligations and the contingent liabilities of state development banks, is the one that crossed 60% and is heading toward 63%.

The difference between the two numbers is largely Pemex. The state oil company carries approximately MX$263.5 billion in debt amortization requirements, and the government’s decision to maintain fuel subsidies of 6–7 pesos per liter while Brent trades above $100 means the fiscal cost of supporting the energy sector is rising precisely when the war-driven revenue windfall might otherwise have reduced it.

The Mexico Debt Paradox: Cutting and Growing at Once

The Fiscal Monitor identified Mexico alongside Turkey and India as one of three emerging economies that improved their fiscal positions over the past year through primary spending moderation. The government’s 2026 budget targets a deficit reduction from 5.7% of GDP in 2024 to approximately 4.1%, and primary spending has indeed been restrained relative to GDP growth.

But debt service now consumes 4.1% of GDP—more than health or education spending—and the interest cost is rising as global rates remain elevated and Mexico’s own central bank holds at restrictive levels. The result is a fiscal position where the flow (deficit) is improving but the stock (total debt) keeps growing because interest payments eat the savings. The IMF’s 1.6% growth projection for Mexico means the denominator is not growing fast enough to outrun the numerator.

What This Means for Markets

Mexico’s sovereign debt still offers yields above 11% for emerging-market investors, and the country’s institutional credibility—independent central bank, transparent fiscal reporting, USMCA trade framework—keeps it in a different category from countries with similar debt ratios. But the 60% threshold carries psychological weight: it is the level at which the European Union’s own fiscal rules begin to trigger corrective mechanisms, and it signals that Mexico’s fiscal buffer against external shocks has narrowed significantly. With the Iran war pushing up energy subsidy costs, Pemex requiring continuous support, and the economy increasingly dependent on a single export category, the question is whether Mexico’s spending discipline can outrun its structural obligations—and the IMF’s projection through 2031 suggests it cannot.

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