Fitch diverges from National Treasury on debt outlook

Fitch Ratings expects South Africa’s debt as a percentage of GDP to start rising again in the year to March 2029 mainly due to weak economic growth, challenging National Treasury and Moody’s Ratings’ projections.

Fitch said in a statement on Monday that it still expects debt to stabilise at about 78% of GDP over the next two fiscal years – a key factor behind its June decision to upgrade South Africa to BB, two notches below investment grade, with a stable outlook.

“Nevertheless, unlike the government, we expect debt to GDP to very modestly rise again” in 2028-29 to 79% of GDP, it said.

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Finance Minister Enoch Godongwana said in his Medium-Term Budget Policy Statement (MTBPS) last week that debt peaked at 78.4% of GDP in 2025-26 and will decline to 76.6% by 2029-30.

Moody’s also sees debt on a downward path. The company, whose measure includes most government guarantees to state-owned enterprises, said on Friday that debt peaked in the last fiscal year and is set for a “clear, albeit gradual” decline.

Moody’s described the budget update as credit positive as it shows fiscal consolidation remains on track despite higher oil prices, tighter monetary policy and weaker nominal GDP growth than assumed in February.

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But it cautioned that the nation has limited fiscal space to absorb shocks.

Moody’s also has South Africa two notches below investment grade but with a positive outlook.

Its next review of South Africa is expected on 27 November, and Fitch Ratings’ on 11 December.

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