For the classification of debt by domestic and external sector, we use the criterion of residency of the debt holder, which is a function of the location and not the nationality of the debt holder.
- Gross domestic debt: Is defined as the financing obtained by the Central Government on the domestic market by placing government securities and direct claims of other institutions, which are payable within the national territory and in domestic currency.
- Gross foreign debt: Is all debt contracted by the Central Government directly or through its financial agencies with financial entities abroad and payable abroad in a currency other than the national currency.
- Debt data: Is classified as short or long term according to the contract period. The former covers loans of less than one year and the latter covers all loans of more than one year.
Scope of the data:
- Institutional coverage of the Central Government: Foreign debt includes the Central Government.
- Federal Government
- Fnancial and nonfinancial public entities
- The domestic debt includes the Federal Government.
- Instrument coverage: The domestic debt of the Federal Government consists of:
- Government securities: Which consist of debt instruments issued by the Federal Government via the Bank of Mexico as its financial agency. Current instruments are:
- Treasury Bills (CETES)
- Federal Government Development Bonds (BONDES)
- Federal Government Development Bonds on fixed interest rate (Bonos)
- Federal Government Development Bonds denominated in Investment Units (Udibonos)
- Savings funds under the Saving for Retirement System (SAR).These financial means come from workers' contributions to their retirement fund which, once deposited in the central bank as funds available to the Federal Government, are posted as liabilities. The criterion for classifying domestic and foreign debt is consistent with the residency definition in the IMF's Balance of Payments Manual, Fifth Edition.
- Assumed debt. Corresponde a la deuda de entidades liquidadas o fusionadas, asumida por el Gobierno Federal.
- Other. Means the domestic liabilities accrued by the Federal Government other than those specified above.
- The foreign debt of the Central Government consists of:
- Government placements on international capital markets, which consist of issues of government bonds, medium-term promissory notes and commercial paper.
- Financing with the international financial institutions, such as: the Inter-American Development Bank (IDB), the International Bank for Reconstruction and Development (IBRD), and the International Fund for Agricultural Development (IFAD).
- Resources obtained directly via the commercial banking sector.
- Bilateral loan means loans between governments via their official banks or via the commercial banking sector guaranteed by an official agency.
- Assumed debt means the debt of liquidated or merged entities that has been assumed by the Federal Government.
- Restructured debt, which refers to financing that has been renegotiated under various programs in order to reduce the balance of debt and debt service, such as: the Paris Club, Brady Bonds, MYRAs, etc.
- Reporting basis: The reporting basis for accounting is cash and not accrual. Thus, all operations are recorded when they occur and on the dates on which payments are made both of the principal and of the financial costs.
- Complementary period: The reporting period refers solely to the calendar year.
- Valuation of foreign-currency-denominated transactions : Because the creditors who are involved in the central government's liabilities report in their statements the movements of external debt in various currencies, it is necessary to convert them into a common currency when we preparing reports. This currency is the U.S. dollar and for the conversion, we use the exchange rate for the last day of the reference month, as provided by the Bank of Mexico for these currencies.
- Valuation of domestic debt instruments:According to the accounting procedures, liabilities on government securities are valued at their value at the time of their primary issue. Their accounting entry varies according to the instrument concerned:
Owing to CETES issued with a discount rate, they are recorded to the price when sold at the primary issue, which is obtained by discounting the discount rate from the nominal value using the following formula:
C = S x ( 1 - D x T / 360)
- C = Market price
- S = Nominal value
- T = Maturity period of the instrument
- D = Discount rate
BONDS are recorded at their nominal value and the difference between this value and the real value is recorded as a cost at the time of sale. Inflation-indexed instruments, such as Ajustabonos and Udibonos, are recorded at their nominal value and their inflation component is reported as an adjustment; the revaluation taking place monthly.
Nature of the Basic Data:
- Data Sources: The basic data come from the accounting records and the financial statements of the Management General of Public Credit, the entity in charge of managing Federal Government debt, and from the reports sent by nonfinancial public entities as well as develop banks. In the first case, they come from the loan contract authorizations, the credit contracts and from the detailed monthly report for each one of the credit lines and instruments, which showed the balances and movements, in the adjustments of each and every credit line that are the responsibility of the Federal Government. In the second case, they come from report as mentioned earlier, which is prepared by public entities based on the reports sent by foreign creditors and their agent banks.
- Adjustments to total transactions: Of the adjustments periodically made to the central government's foreign and domestic debt balances, there are those made for the exchange rate, the inflation rate, and those made for movements that were not reported opportunely.
- Exchange rate adjustments: For foreign debt, it is grouped in U.S. dollars to obtain the total balance and their movements. However, the primary sources of financing are in the original currencies of the contract, and so a change is generated in the balances of foreign debt expressed in dollars, which makes it necessary to adjust the debt for changes in the exchange rates of the various currencies against the dollar between the dates on which the currencies are measured. For domestic debt, even though it is always reported in the national currency, if there were any sum denominated in a currency other than the peso, the positive or negative difference between our currency and the dollar would be presented as an adjustment in the accounting period.
- Adjustments for inflation: Inflation impacts on some inflation-indexed instruments, such as Udibonos, SAR and any other debt negotiated in Investment Units (UDIs), the yield on which is adjusted for inflation occurring during the period concerned.
- Other changes in the stock of debt: This changes includes movements not reported opportunely and which frequently belong to other periods (disposal or amortization) are also included.
- Netting transactions: The gross debt is obtained of credit lines recorded at their nominal value, except for discounted securities. To obtain the net debt balance, we use the assets held by the Central Government deposited abroad to net out foreign debt and those in the Federation Treasury for domestic debt, which are discounted to respective debt..