UPDATE 1-‘Dark’ fund targeted as Mexico’s new government hunts budget savings
(Adds comments on possible budget cuts to discretionary funding)
MEXICO CITY, Dec 14 (Reuters) – Budget planners for Mexico’s new leftist government are considering trimming what they call an opaque fund, a lawmaker said on Friday, which could net up to $5 billion as they aim to make savings without raising taxes.
Alfonso Ramirez Cuellar, the head of the budget committee in the lower house told reporters that fund known as Ramo 23, which includes federal transfers to states and municipalities, was “full of darkness and discretionality.”
In an earlier interview with Reuters, Ramirez said transfers from Ramo 23 could be cut by about a third.
President Andres Manuel Lopez Obrador, who won a landslide victory that formed the first congressional majorities by a ruling party in two decades, has pledged to generate savings by ending corruption and waste, though analysts question how quickly he can make good on that pledge.
The government presents its first, closely watched, budget on Saturday.
Ramirez told Reuters that some of the Ramo 23 funding was poorly supervised, making it possible to siphon off money for purposes besides those initially intended. The fund’s total expenditures have recently been between 250 billion pesos ($12.35 billion) and 300 billion pesos on average a year, he said.
The past administration under former President Enrique Pena Nieto poured more money into the program than lawmakers had approved, he said.
“There is an appalling difference between what is approved and what is spent,” he said.
Among the projects funded by discretionary transfers have been the paving of roads and the construction of sports centers.
In recent years, states controlled by Pena Nieto’s party had landed more funding than opposition-controlled states, Ramirez said.
The lawmaker’s projections align with estimates by Bank of America Merrill Lynch analysts that streamlining Ramo 23 would net about 90 billion pesos, or 0.4 percent of gross domestic product (GDP).
But the analysts are skeptical Lopez Obrador will be able to find enough savings in other areas to reach a primary surplus target of 1 percent of GDP.
A separate part of the budget plan, to cut taxes along Mexico’s northern border, will have “no significant impact” on the tax take, Ramirez said on Friday. ($1 = 20.2448 Mexican pesos) (Reporting by Michael O’Boyle, Editing by Daina Beth Solomon and Alistair Bell)
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