Pretoria: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.
According to South African Government News Agency, this effort follows the achievement of debt stabilization at 78.4% of Gross Domestic Product (GDP) in 2025/26. The government is on course to achieve these objectives despite heightened global volatility. Lower debt levels are expected to reduce borrowing costs and improve investor sentiment, supporting higher public and private investment, and fostering stronger growth and job creation.
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. The main budget fiscal balances for 2025/26 outperformed the 2026 Budget estimates, mainly due to strong revenue collections and lower debt-service costs.
The 2026/27 estimated tax revenue collection has been revised upward by R17.1 billion, with petroleum royalties revised up by some R6.8 billion. Additionally, departmental revenue is 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, have stabilized at 21.3% in 2024/25 and are projected to decline to an average of 20.6% over the Medium-Term Expenditure Framework (MTEF) period, remaining stable as a share of GDP. The government plans to support the economy through prudent fiscal policy and increased capital investment, improve value for money in public spending, and reduce debt-service costs as a share of revenue while managing debt redemptions.
The growing primary surplus will ensure that the ratio of gross debt to GDP declines, reducing debt-service costs as a share of revenue and allowing the government to allocate more resources to developmental priorities and 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, enabling the government to better manage maturing debt.
Improving government spending efficiency remains a top priority, supported by budget reforms, program 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 the government's ghost worker investigations are being consolidated and will be published in the 2027 Budget.