National Treasury has set its focus on further reducing South Africa’s debt-to-GDP ratio over the rest of the decade by continuing to grow the primary surplus and narrowing the budget deficit.
This after achieving debt stabilisation at 78.4% of Gross Domestic Product (GDP) in 2025/26.
“Government is on course to achieve these objectives, despite heightened global volatility.
“Lower debt levels will reduce borrowing costs and improve investor sentiment, supporting higher public and private investment, and stronger growth and job creation,” the department’s Medium Term Budget Policy Statement read.
National Treasury noted that the fiscal framework has remained resilient, despite “financial market volatility, heightened economic uncertainty and global price shocks” due to the Middle Eastern conflict.
“Main budget fiscal balances for 2025/26 outperformed 2026 Budget estimates, mainly due to strong revenue collections and lower debt-service costs,” the MTBPS read.
Revenue collection
The 2026/27 estimated tax revenue collection has been revised upward by R17.1 billion, while petroleum royalties are revised up by some R6.8 billion.
Additionally, departmental revenue is also expected to rise by R14.3 billion.
“In total, tax and non-tax revenue and National Revenue Fund receipts are R54.1 billion above the 2026 Budget estimate.
“This outcome will support a pipeline of infrastructure projects approved through the Budget Facility for Infrastructure, alleviate some spending pressures and increase the contingency reserve, mitigating risks to the framework.
“Debt-service costs, as a proportion of main budget revenue, stabilised at 21.3% in 2024/25 and are projected to decline to an average of 20.6% over the MTEF [Medium-Term Expenditure Framework] period, but remain stable as a share of GDP,” the statement read.
Fiscal strategy
Having stabilised the gross debt, intensified attention is aimed at growing the main budget surplus and reducing the debt-to-GDP ratio over the rest of the decade.
Government will:
- Support the economy through prudent fiscal policy and increased capital investment.
- Improve value for money in public spending by conducting programme reviews and implementing their recommendations, while protecting the social wage and directing a growing share of spending towards capital investment.
- Reduce debt-service costs as a share of revenue, while managing debt redemptions.
- Propose a principles-based fiscal anchor to entrench fiscal sustainability.
“The growing primary surplus will ensure that the ratio of gross debt to GDP declines. This will reduce debt-service costs as a share of revenue, opening space for government to allocate more resources to developmental priorities and to build buffers against fiscal shocks.
“The main budget deficit of 3.7% of GDP in the current year is forecast to decline to 2.5% in 2029/30. The narrowing deficit will enable government to better manage maturing debt,” the MTBPS explained.
The department emphasised that improving government’s spending efficiency remains a top priority, “supported by budget reforms, programme reviews and efficiency measures”.
“These efforts have yielded R38.1 billion in targeted and responsible savings that are being redirected to priority spending areas over the MTEF period.
“The Early Retirement Programme aims to rejuvenate the public service and will generate estimated average annual savings of R4.4 billion over the next three years. The findings of government’s ghost worker investigations are being consolidated and will be published in the 2027 Budget,” the MTBPS stated. – SAnews.gov.za
