Mexico’s president intends to refinance state-owned Pemex’s debt with IMF credits

RIO DE JANEIRO, BRAZIL – Mexico has begun a debt refinancing process for state-owned Petroleos Mexicanos (Pemex) after the country received a transfer of approximately US$12 billion from the International Monetary Fund (IMF).

President Andrés Manuel López Obrador on Monday said that the refinancing had begun and reiterated that he intends to use the newly issued IMF reserves to pay off debts, but that he was unable to provide further details on the operation.

Government spokesman Jesus Ramirez confirmed that Pemex’s debt is being refinanced. The government is currently assessing if the US$12 billion in IMF reserves could be fully or partially used to pay off Pemex’s debt, according to another source.

“I can’t say much, but a debt refinancing process has begun,” the Mexican president said at his morning press conference. “But let me just say that Pemex is not adrift. It is a company of the nation, of the Mexican people.”

The country’s central bank says Mexico can only use these funds if it buys them from the monetary authority, which received the IMF transfer as international reserves to help countries struggling with the pandemic. The transfer refers to the IMF’s so-called special drawing rights (SDR), which are allocated to member countries based on their membership in the Fund.

López Obrador has prioritized aid to Pemex in an attempt to reduce the state-owned company’s borrowing costs and free up cash to invest in exploration and production, after a decade and a half of declining output. The oil company currently owes US$115 billion.