Debt peaks at 78.4% of GDP as Treasury bets on a R54 billion revenue windfall
National Treasury says the debt ratio has stabilised and now has to fall, with a smaller deficit of 2.5% of GDP pencilled in for 2029/30 and R38.1 billion in savings already redirected.
National Treasury has put South Africa’s debt-to-GDP ratio at 78.4% for 2025/26, and says the task for the rest of the decade is to bring it down.
The Medium Term Budget Policy Statement, released on 21 October, says debt has stabilised and that the plan from here is to keep growing the primary surplus while narrowing the budget deficit. “Government is on course to achieve these objectives, despite heightened global volatility,” the statement reads.
Treasury’s argument for why the number matters to ordinary households is borrowing cost. “Lower debt levels will reduce borrowing costs and improve investor sentiment, supporting higher public and private investment, and stronger growth and job creation,” the department states.
Revenue came in ahead of plan. The 2026/27 estimated tax revenue collection has been revised upward by R17.1 billion, petroleum royalties by about R6.8 billion, and departmental revenue by R14.3 billion. In total, Treasury says tax and non-tax revenue and National Revenue Fund receipts are R54.1 billion above the 2026 Budget estimate.
That money is earmarked to support a pipeline of infrastructure projects approved through the Budget Facility for Infrastructure, to ease some spending pressures and to increase the contingency reserve.
Debt-service costs, as a proportion of main budget revenue, stabilised at 21.3% in 2024/25, and Treasury projects them to decline to an average of 20.6% over the Medium-Term Expenditure Framework period, while remaining stable as a share of GDP.
The main budget deficit sits at 3.7% of GDP in the current year and is forecast to fall to 2.5% in 2029/30. Treasury says the narrowing deficit will let government better manage maturing debt. Main budget fiscal balances for 2025/26 outperformed 2026 Budget estimates, which Treasury attributes mainly to strong revenue collections and lower debt-service costs.
On spending, the department lists R38.1 billion in what it calls targeted and responsible savings redirected to priority areas over the MTEF period. It says the Early Retirement Programme, aimed at rejuvenating the public service, will generate estimated average annual savings of R4.4 billion over the next three years. The findings of government’s ghost worker investigations are being consolidated and will be published in the 2027 Budget.
The stated commitments for the rest of the decade are to support the economy through prudent fiscal policy and increased capital investment, to improve value for money through programme reviews while protecting the social wage, to reduce debt-service costs as a share of revenue while managing debt redemptions, and to propose a principles-based fiscal anchor to entrench fiscal sustainability.
Treasury describes the fiscal framework as having remained resilient despite financial market volatility, heightened economic uncertainty and global price shocks it links to the Middle Eastern conflict.
This report is based on the SAnews (South African Government News Agency) summary of the MTBPS rather than the full document. The summary is available at https://www.sanews.gov.za/south-africa/treasury-tackles-debt.
