Cape town: The country’s financial future was on the agenda on Wednesday when Finance Minister Enoch Godongwana delivered the 2026 Budget Speech in Parliament. Godongwana noted that this year’s Budget Speech comes at a critical juncture for the public purse.
According to South African Government News Agency, Godongwana emphasized the importance of this moment in managing public finances. He reflected on the challenges faced over the past few years, including the economic fallout from State Capture, the downgrading of South Africa’s credit status in 2020, the impacts of the Coronavirus pandemic, and the Russia-Ukraine conflict. Furthermore, in 2023, the Financial Action Task Force had placed South Africa on its grey list, indicating significant financial strain and stalled growth. Godongwana highlighted that these challenges were turned into catalysts for change rather than defining moments of crisis.
The commitment to a clear reform agenda and disciplined fiscal strategy has led to significant improvements. South Africa’s public debt is expected to stabilize this financial year, with growth projected in the medium term. Godongwana announced that, for the first time in 17 years, debt will stabilize and continue to fall in the coming years. The budget deficit has narrowed, debt-service costs are decreasing, and South Africa has been removed from the FATF grey list. The country also secured its first credit rating upgrade in 16 years, with borrowing costs easing and creating space for growth and development.
The National Treasury’s 2026 Budget Review supports Godongwana’s optimism, reporting a R12.4 billion lower main budget deficit than last year’s forecast due to strong fiscal outcomes. Since the 2021/22 financial year, the main budget deficit has narrowed from 5.1% of GDP to a projected 4.5% in 2025/26, with further declines to 2.9% projected by 2028/29. The primary balance shifted from deficit to surplus in 2023/24 for the first time since the 2008 global financial crisis, with a projection to grow to 2.3% of GDP by 2028/29.
The consolidated budget deficit is expected to narrow over the medium-term expenditure framework period, with gross loan debt stabilizing this year at 78.9% of GDP. Although debt-service costs continue to rise in nominal terms, they are expected to peak in the current financial year and then decline as a percentage of revenue. National Treasury emphasized that the government is delivering on its pledge to rebuild the health of public finances, ensuring a steady decline in debt as a share of GDP and reducing debt servicing costs.
The improvements have been driven by a strategy focusing on stabilizing debt, investing in infrastructure, and improving spending efficiency. These efforts have resulted in South Africa receiving its first sovereign credit rating upgrade since 2009, with lower inflation and stronger public finances boosting confidence and reducing borrowing costs. The removal of South Africa from the FATF grey list further illustrates the capacity for improvement, and the government plans to build on this success across other areas.