Mexico slashes budget deficit by US $8.5B as tax collection surges 8.9%

The highest increase in tax revenue in almost a decade. A year-over-year reduction in public spending of over 5%. A reduction in government debt as a percentage of GDP. A lower-than-expected budget deficit.

Mexico’s Finance Ministry (SHCP) reported these results on Monday in a report on “public finances and public debt” in the first five months of 2025.

Here is the key information.

Tax revenue up 8.9% 

The SHCP reported that tax collection increased 8.9% annually in real terms between January and May. That increase was the largest for the first five months of the year since 2016, the ministry said.

Total tax revenue for the January-May period was 2.41 trillion pesos (US $128.36 billion at the current exchange rate), 83 billion pesos higher than expected.

The SHCP said that the growth in tax revenue “was mainly driven” by increases in the collection of Mexico’s value-added tax (up 12.5% annually), income tax (up 8.2% annually) and taxes collected by customs (up 38.4% annually).

It said that the increase in tax revenue reflected “both the strength of the internal market and greater tax collection efficiency.”

customs tax collection Mexico City
The SHCP said that the increase in the collection of import taxes was driven by “increased customs surveillance” and the imposition of taxes on products brought into the country by “digital platforms.” (Cuartoscuro)

IVA:

  • The 12.5% growth in value-added tax (IVA) revenue was the highest increase for the January-May period since 2014.
  • IVA revenue totaled 653.54 billion pesos, 52 billion pesos higher than projected.
  • The SHCP said that “tax collection efforts” in federal tax agency SAT and customs were a factor in the increased IVA revenue.

ISR:

  • Income tax (ISR) revenue totaled 1.37 trillion pesos in the first five months of the year, 40 billion pesos more than anticipated.
  • The SHCP said that the 8.2% increase in income tax revenue occurred within “an environment of salary improvements and solid employment metrics.”

Import taxes:

  • The 38.4% annual growth in revenue from import taxes was the highest increase on record for the January-May period.
  • Revenue totaled 69.11 billion pesos (not including IVA collected by customs).
  • The SHCP said that the increase in the collection of import taxes was driven by “increased customs surveillance” and the imposition of taxes on products brought into the country by “digital platforms,” such as foreign e-commerce companies.

IEPS:

  • Revenue collected via the IEPS excise tax — levied on products such as gasoline, alcohol and cigarettes — declined 1.1% annually in real terms between January and May.
  • IEPS revenue totaled 268.44 billion pesos in the first five months of the year.

Non-tax revenue rose almost 30%, but oil sales slumped 

The SHCP reported that non-tax revenue increased 28.4% annually in real terms between January and May. It said the growth was driven by increases in revenue from royalties (+11%), the sale of “products” (+20.2%) and windfall gains (+42.6%).

Domestic and foreign petroleum sales brought in revenue of 375.21 billion pesos in the first five months of the year, a 23.8% reduction compared to the same period of 2024. Oil income was 175.56 billion pesos lower than anticipated.

World’s largest wealth fund divests from Pemex, citing corruption

The newspaper El Economista said that lower-than-expected oil production was the cause of the year-over-year decline in petroleum sales and the failure to reach the predicted revenue level.

Total government revenue, including tax and non-tax income, in the first five months of the year was 3.47 trillion pesos (US $185.15 billion), a 3.7% increase compared to the same period of 2024. Total revenue was 64.47 billion pesos lower than projected.

Public spending down 5.3% 

The federal government spent 3.72 trillion pesos (US $198.26 billion) between January and May, a 5.3% decrease compared to the first five months of 2024.

“In compliance with fiscal goals, public spending decreased 5.3% annually in real terms,” the SHCP said, adding that there was an “efficient” use of resources in the January-May period.

Expenditure was lower than expected, accounting for 94.3% of the projected outlay, the Finance Ministry said.

Nevertheless, the government’s outlay “guaranteed the provision of social programs, infrastructure and public services,” the SHCP said.

Expenditure in detail:

  • The government spent around 2.6 trillion pesos on “programmed,” or planned, expenses.
  • The government spent 648.71 billion pesos on unprogrammed expenses.
  • Federal allocations to Mexico’s states increased 3% annually in the first five months of the year.

Public sector debt dips below 50% of GDP 

The SHCP reported that public sector debt at the end of May totaled 17.67 trillion pesos (US $942.4 billion), a 13% increase compared to a year earlier.

It said that amount is equivalent to 49.2% of Mexico’s gross domestic product.

The current level of debt as a percentage of GDP “compares favorably with the 51.3% of GDP recorded at the close of 2024,” the SHCP said.

“Between December 2024 and May 2025, the debt balance increased 250 billion pesos, which represented a reduction of 0.1% in real terms, mainly attributable to the appreciation of the exchange rate [for the Mexican peso] on foreign debt,” the ministry said.

The SHCP said that the costs of serving Mexico’s debt increased 13.1% annually due to “restrictive local and global financial conditions.”

Nevertheless, those costs — 460.55 billion pesos — were 21 billion pesos lower than budgeted “thanks to financial management operations that generated savings and improved the maturity profile of the federal government’s debt,” the ministry said.

Budget deficit 160 billion pesos lower than expected 

The SHCP said that at the end of May, Mexico’s “fiscal balances reflected a solid performance” and were better than expected.

“The budget deficit stood at 251 billion pesos, lower than the programmed 411 billion,” the ministry said.

The SHCP is aiming to record a budget deficit of 3.9% of GDP in 2025, after the deficit rose to a record high 5.7% of GDP in 2024.

Mexico’s Congress approved a 9.3-trillion-peso budget for 2025 late last year.

The Finance Ministry said that “the balance of public finances at the close of May was maintained in line with the annual goals approved by the Congress of the Union, supported by a sustained growth in budget income and strategic management of public expenditure.”

With reports from El Economista and La Jornada 

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