The fiscal ship has turned – now it needs momentum

Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS) confirms what became apparent in February: South Africa’s fiscal ship has finally started to turn.

It could mark the end of a long period during which SA’s debt-to-GDP ratio deteriorated significantly.

In 2008, the ratio stood at 28%. By 2016, it had risen to 48%. It currently stands at around 78%. Hopefully, it will now start to decline and reach the projected 66% in 2035.

The most anticipated announcement was the proposed fiscal anchor, a set of rules or principles that limits how much the government can spend and borrow to keep public finances and debt sustainable over time.

Read: Unanimous GNU agreement on fiscal anchor for SA

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Godongwana said legislation will be introduced next year, but it will not be a rigid numerical debt ceiling. Instead, every future administration will have to adopt a fiscal plan that sets out its objectives, targets, assumptions, and risks, and explain any material deviation from it. (The government of national unity unanimously approved it.)

However, this differs from the approach proposed by the International Monetary Fund (IMF). The IMF recommended that South Africa adopt a concrete debt anchor of 70% of GDP by the early 2030s as an interim target, moving towards a long-term sustainable debt anchor of 60% of GDP.

It is difficult to pass judgement on the anchor before seeing the details of the legislation, but it is a very good start.

The proof will ultimately lie in the implementation, but the proposal is nevertheless a strong signal of the government’s commitment to fiscal discipline. It will also give parliament, taxpayers and rating agencies a much clearer yardstick against which to hold the executive accountable.

Read our full in-depth and up-to-date MTBPS 2026 coverage here.

Crucially, fiscal discipline must translate into a sustained reduction in debt relative to GDP. If this is achieved over the next few years, it could significantly reduce South Africa’s future interest bill, with debt-service costs currently consuming 21c of every rand of government revenue.

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The government faces a major refinancing cycle from around 2030, with about R1.5 trillion in government bonds maturing between 2030/31 and 2034/35 alone. A stronger fiscal position, and potentially improved credit ratings, could help the government refinance this debt at lower interest rates. Even a modest reduction in those rates could save taxpayers billions of rand in interest costs for years to come.

Read: MTBPS 2026 in a minute

Hopefully, the rating agencies will take note of the fiscal anchor and the apparent turning point in government debt. Further upgrades would lower South Africa’s risk premium and borrowing costs, which could accelerate fiscal recovery by reducing the amount the government spends on debt servicing.

However, the elephant in the room remains South Africa’s pedestrian economic growth, with Treasury cutting its 2026 forecast from 1.6% to 1.2%.

Current policies are clearly not generating sufficient growth, and the structural reform programme needs to accelerate. But at least one critical structural weakness – the country’s deteriorating fiscal position – is now being addressed. The fiscal ship has turned. South Africa now needs economic growth to provide the momentum, and continued fiscal discipline to keep it on course.

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