IMF urges Mexico to balance budget in 2013, boost tax take

MEXICO CITY Wed Nov 28, 2012 2:59pm EST

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MEXICO CITY Nov 28 (Reuters) - Mexico must aim for a balanced budget in 2013 and boost taxation and revenue to avoid over-dependence on oil income, the International Monetary Fund said on Wednesday.

After its annual health check of Mexico's economy, the IMF said growth in Latin America's second-largest economy was holding up due largely to strength in the United States. Mexico's economy is closely linked to the United States, which buys almost 80 percent of its exports.

But the IMF said risks were to the downside, including from a sudden exodus of foreign investment, and highlighted the need for sound management of public finances.

"(IMF directors) encouraged the return to a balanced budget under Mexico's fiscal rule in 2013," the IMF said in its regular Article IV report.

"To this end, revenue mobilization efforts are needed to raise the revenue to GDP ratio from its relatively low level, reduce dependence on oil revenue and avoid excessive compression of public investment."

Mexico has not yet released details of its budget for 2013 but for 2012 approved a deficit worth 0.4 percent of gross domestic product, excluding investment by state oil firm Pemex.

The IMF also said the Mexican central bank had helped support growth by keeping rates low at 4.5 percent and that it was essential to give signals about the right level for rates in the face of shocks to help keep inflation expectations low.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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