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Mexican President Wants To Use IMF Funds To Pay Huge Pemex Debt

Mexico’s president, Andres Manuel Lopez Obrador, has suggested that his government may use funds from the International Monetary Fund to pay off some of state energy giant Pemex’s massive debt, Reuters has reported.

“Remember the $12.5 billion that arrived that belong to the public treasury, we want that to be used to pay off debt, but it’s not possible to give information on the subject because of the principles or norms that are established,” the president, often referred to by media as AMLO, told a news conference in response to a question on how he planned to help Pemex reduce its debt burden.

That $12.5 billion, according to the Reuters report, is a tranche of special drawing rights from the IMF—an asset group specific to the Fund, which represents a claim to hard currency, for which they can be exchanged. Earlier this year, Lopez Obrador said the rights would be used to pay off debt but did not specify which debt exactly they would be used for.

Meanwhile, Bloomberg reported that part of the IMF money could be used to refinance some of the Pemex debt. Citing a spokesman for President Lopez Obrador, the agency reported the refinancing had already started. The report also quoted an unnamed source that confirmed paying off some of the debt with IMF money was being considered.

“The most expensive debt is Pemex, it’s the way you could reduce financing costs the most,” Claudia Ceja, a strategist at BBVA, told Bloomberg. “First we have to see if they can use it for debt payment by law, and then there would probably be some swap, government buyback, or some intermediate operation.”

Pemex has become the most indebted oil company in the world, with a load of $113.2 billion as of the end of 2020. The Lopez Obrador government has been going out of its way to help reduce the massive debt burden by providing Pemex with debt relief and capital injections that have affected the country’s fiscal deficit levels.

This year alone, the government will absorb some $6 billion in debt amortization payments owed by Pemex.

By Irina Slav for Oilprice.com

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