Chapter II in IMF Country Report No. 04/250.
Exchange rate depreciation contributed significantly to the increase in the debt-to-GDP ratio (approximately 2 percentage points).
Given that no major structural reforms were enacted, and GDP growth fell short of the PRONAFIDE inertial scenario, we limit our comparison to the assumptions underlying the latter scenario, as the Mexican authorities commonly do. Figure 1 demonstrates the sharp divergence in 2002 and 2003 between actual and projected growth rates from the PRONAFIDE reforma scenario.
This compression assumes that non-oil recurring revenues would remain broadly constant in relation to GDP. While administrative reforms would be desirable to raise the revenue yield of the existing tax system, the experience of recent years suggests that revenue increases from this source would be modest.
Reflecting growing investment needs in the energy sector and the assumption of PIDIREGAS-related debt by the government when completed projects are handed over to the public sector.
Included cuts in administrative outlays and a wage freeze for middle- and higher-level federal workers.