[China Co-Financing Fund] IDB administers $37.6 million loan from CHC for Program to Strengthen Fiscal Management in Federative Entities and Municipios

[China Co-Financing Fund] IDB administers $37.6 million loan from CHC for Program to Strengthen Fiscal Management in Federative Entities and Municipios On August 24, 2017, the Inter-American Development Bank (IDB) signed signed two loan contracts with the Government of Mexico to finance the Program to Strengthen Fiscal Management in Federative Entities and Municipios: a $612.4 million loan that IDB issued from its ordinary capital (Loan 4072/OC-ME), and a $37.6 million loan from the People's Bank of China (Loan 4071/CH-ME) via the China Co-Financing Fund for Latin America and the Caribbean (CHC).

The $650 million of loan financing authorized by IDB was designed to cover the total program cost.

The IDB approval date for the loan financing was June 6, 2017, and it refers to this project as ‘ME-L1253 : Program to Strengthen Fiscal Management in Federative Entities and Municipios’.

The full amount of the loan was scheduled for repayment on the loan’s final maturity date (February 15, 2030) as a ‘bullet payment.’ The program's overall purpose was to strengthen the fiscal regulation, policy, transparency, responsibility, and long-term sustainability of subnational, including state and municipal, governments in Mexico.

This was accomplished through policy reforms and structural changes in the management of public finances for these governments.

These included, for example, the establishment of the Financial Discipline Law of Federative Entities and Municipalities (Ley de Disciplina Financiera de las Entidades Federativas y los Municipios) to create updated fiscal management rules, and the creation of registries to publish, for the public to view, information on local governments' debt obligations and finances.

It also included training programs for government officials about the reforms.

Many of these reforms also had the goal of increasing macroeconomic stability. 11 states and 105 municipalities had sufficient levels of indebtedness, over a certain baseline, to be of interest to the program.

By the end of 2019, 5 states and 33 municipalities had levels of indebtedness above this baseline, exceeding the goal for states but missing the goal for municipalities. The final disbursement, for the total of both the IDB and China Co-Financing Fund loans, was made on August 24, 2018. Project execution ended during the first half of 2019.

The Secretariat of Finance and Public Credit (Secretaría de Hacienda y Crédito Público - SHCP) was responsible for project execution, including its International Finance Affairs Unit (Unidad de Asuntos Internacionales de Hacienda, UAIH), which helped design the program, and its Federal Entities Coordination Unit (Unidad de Coordinación con Entidades Federativas, UCEF).

The UCEF helped carry out technical work prior to, and helped facilitate evaluation and program monitoring during, project execution.