Debt finally falls as Godongwana trims growth forecast to 1.2%
The Medium-Term Budget Policy Statement puts debt-to-GDP at 78.4% for 2025/26, the first stabilisation in nearly two decades, but slower exports and Middle East conflict pull the 2026 growth forecast down from 1.6%.
Finance Minister Enoch Godongwana used the Medium-Term Budget Policy Statement to tell Parliament that government’s turn away from fiscal fragility is beginning to pay off, with debt stabilising at 78.4% of GDP in 2025/26, the first time in nearly two decades.
“Today, that commitment is beginning to pay off,” Godongwana said in the House on Wednesday, according to SAnews (South African Government News Agency).
The headline number is the debt ratio. Godongwana said debt as a percentage of GDP is now falling, which he described as creating a stronger foundation for investment, growth and job creation. He pointed to positive rating actions from all three major global credit rating agencies earlier this year, despite what he called a challenging global environment.
The budget deficit is also narrower than February’s forecast. It will now come in at 4.3% of GDP this year compared with the 4.5% projected at Budget time, and the minister said it should fall to 2.5% by 2030. The primary surplus, where revenue exceeds non-interest spending, rises from 1.7% of GDP this year to nearly 3% by 2030.
Growth is the weaker half of the picture. Godongwana cut the 2026 forecast to 1.2% from the 1.6% projected in February, citing a prolonged conflict in the Middle East and El Niño’s likely effect on producer costs and output. Domestic activity has already lost momentum, he said, especially in export-linked sectors. Growth is expected to recover to 1.6% in 2027 and 2% by 2029.
“But, growth remains too low,” the minister said, putting the emphasis on structural reforms, state capability and public infrastructure delivery. If those hold, he said growth could exceed 3% a year.
The fiscal strategy, he said, rests on four pillars: prudent fiscal policy and higher capital investment, structural reform, value for money through cutting waste, and reducing debt-service costs while managing the debt burden. The minister described the strategy as on course.
To lock the approach in beyond one administration, Treasury released draft fiscal anchor legislation for public comment in October, with tabling in Parliament expected next year. The proposed law would write fiscal sustainability into the Public Finance Management Act as a standard rather than a rigid numerical rule, require each administration after a general election to set its own fiscal objectives consistent with its electoral mandate, report against them at every Budget and explain any material deviation to Parliament. The Financial and Fiscal Commission would independently report on whether the fiscal framework is consistent with the administration’s plan.
“Fiscal sustainability cannot depend on the commitments of a single administration,” Godongwana said.
The account above is drawn from SAnews’s summary of the MTBPS as delivered, not from the full text of the statement itself. The source can be read at https://www.sanews.gov.za/south-africa/south-african-economy-shows-resilience-despite-global-shocks.
