By Stefanie Eschenbacher and Abraham Gonzalez

MEXICO CITY (Reuters) – Mexico’s finance ministry is considering extending relaxed banking credit rules to help its battered economy recover, a top official said on Wednesday, after it presented an austere 2021 budget that leaves little room to maneuver.

Deputy Finance Minister Gabriel Yorio said the ministry was in talks with the banking industry and the central bank about the possible extension until next year of the temporary measures designed to avoid defaults and loss of collateral.

The measures were introduced earlier this year as part of the government’s strategy to reduce the impact of the coronavirus containment in the country, which is still scarred by memories of the 1995 “Tequila crisis,” when Mexicans lost homes and savings.

Yorio said he hoped an extension could be announced within a “couple of weeks,” while suggesting the facilities could be restricted to certain sectors of the economy to limit risks to the financial system.

Earlier this year, the finance ministry and the central bank agreed to loosen credit quality restrictions for banks. In turn, banks were able to offer borrowers repayment options so as to avoid defaults.

“What we have to do, maybe, is be selective with the sectors,” Yorio said.

Industries that had already reopened and potentially had better cash flow might be excluded, he said, to focus resources on others, such as airlines, that would face a slow recovery.

On Tuesday the government unveiled a lean budget that aims to reduce the country’s debt as a proportion of GDP in 2021 even as it struggles with high coronavirus infections and a slow economic recovery.

Speaking in an interview at the National Palace a day after the budget, Yorio acknowledged that it could take two to three years for Mexico’s economy to reach its pre-pandemic size.

“If the economic opening is delayed, it might take us even more time,” he said, adding that the recovery was a concern for credit ratings agencies which have Mexico on a negative outlook.

Ratings agencies have Mexico’s bonds still several notches above speculative grade, or junk. But investors increasingly worry that they will eventually follow those of state oil company Petroleos Mexicanos in its descent into junk.

“They all measure the credit risk…that’s why it is important to maintain stable debt,” Yorio said.

“But the second most important variable is in terms of growth,” he said, adding that the risk of a downgrade was one of the main worries in the ministry.

President Andres Manuel Lopez Obrador has been an outlier among both wealthy and emerging nations, insisting on tight spending limits even as the economy fell in the deepest recession since the 1930s Great Depression.

Latin America’s second-largest economy was already in a mild recession before the pandemic.

The room for economic stimulus from budget measures was constrained in a country that collects just 15% of GDP in tax, Yorio said, hence the need to turn to the financial system to support growth.

“Not all measures have to come from the budget,” he said.