The Mexican Institute of Finance Executives (IMEF) demands a structural tax reform that broadens the income base and reduces the deficit, which reached 4.8% of GDP in 2025. The agency warns that without measures, Mexico could lose its investment grade.
The Mexican Institute of Finance Executives (IMEF) has issued a clear warning to the government of Claudia Sheinbaum: without a comprehensive tax reform, the country's public finances are heading towards a deterioration that could cost Mexico its investment grade. The request, supported by six analysts consulted by the agency, comes at a time when the public deficit has surged to 4.8% of GDP in 2025, well above the 4% considered sustainable.
An increasingly rigid public spending and a deficit that won't budge
IMEF points out that approximately 60% of public spending corresponds to mandatory or fixed items: pensions, subsidies, debt service, and transfers to states and municipalities. These items already account for 70% of public sector revenues, and in 2025 they exceeded tax revenues, a situation that the institute expects to repeat in 2026.
This imbalance has forced the government to incur more debt to meet its commitments. The 2024 deficit reached 6% of GDP, the highest in years, driven by a double-digit increase in subsidies and fixed investment in megaprojects. Although in 2025 the deficit was reduced to 4.8%, the consensus among analysts estimates that it will remain at that level during 2026, far from the 4% target.
"This Institute urges the authorities to immediately implement a structural tax reform that broadens the income base, to make public finance figures transparent with assumptions aligned to market consensus, and to prepare a contingency plan in the event of a potential loss of investment grade," the agency stated.
IMEF emphasizes that the rigidity of spending complicates any adjustment. Subsidies and transfers, being difficult to reduce due to their social impact, have led to sacrificing fixed investment, but without achieving the necessary fiscal consolidation. The situation is particularly critical in Pemex and CFE, whose pensions represent a ticking time bomb: about 220,000 employees can retire between the ages of 55 and 60, and the total cost of their pensions would amount to 3.4 trillion pesos (about 200 billion dollars), nearly 10% of the nominal GDP of 2025.
The risk of losing investment grade and the cost of debt
Excessive spending has already led to downgrades in Mexico's sovereign debt rating. IMEF warns that, if the course is not corrected, rating agencies could withdraw the investment grade, which would further increase the country's financing costs. "Today the financial cost of Mexican debt is higher than it was eight years ago, and losing the investment grade would raise its cost even more," the report states.
In 2025, Mexico allocated 6% of GDP to pension payments, a figure that IMEF expects to rise to 8% by 2030. The pension system, especially that of Pemex and CFE, faces major challenges due to the aging population and increased life expectancy. The agency estimates that, if current trends continue, spending on pensions for these two public companies could skyrocket.
"If we consider that life expectancy is at least 20 years from retirement, the expenditure on pensions for those two public entities alone would amount to 3.4 trillion current pesos (approximately 200 billion dollars), nearly 10% of the nominal GDP of 2025," IMEF warned.
To avoid this scenario, IMEF analysts propose a combination of measures: reviewing and flexibilising public spending, increasing revenues by broadening the tax base, deeply reforming Pemex's operational model, and improving legal certainty to attract investment. The tax reform, which the previous president Andrés Manuel López Obrador rejected, is seen as the central pillar of any recovery plan.
IMEF insists that the government must act urgently. President Sheinbaum, who took office in October 2024, faces the challenge of balancing public accounts without provoking social discontent that could jeopardise her popularity. The upcoming presentation of the 2027 Economic Package will be the first test to see if IMEF's recommendations translate into concrete measures. Meanwhile, the clock is ticking for Mexico's credit rating.
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