Finance Minister Enoch Godongwana is expected to announce a new rule to keep government debt under control. He was due to present his medium-term budget update to Parliament in Cape Town at 2pm.
The rule, known as a fiscal anchor, would aim to lock in recent gains in the country’s public finances. These gains include higher than expected tax income, controlled spending and growing primary surpluses, Moneyweb reported.
“While there is reason to be optimistic about the fiscal numbers, I think the real test will be whether National Treasury can demonstrate that the improvement is sustainable and underpinned by credible, enforceable fiscal discipline,” said Keabetswe Mojapelo, head of economic research at Old Mutual.
Mojapelo said the rule should be backed by law, ideally with protection in the Constitution. Without that, the rule could be changed by future governments, Mojapelo said.
Bloomberg asked 10 economists what form the rule might take. Four expect a target based on debt as a share of gross domestic product (GDP). Three expect a mix of measures.
The other three expect Treasury to formally adopt the main budget primary balance as its guide. Most of the economists expect the rule to become legally binding by the end of 2028.
Since 2021, Treasury has used the primary surplus as an informal guide. This is when income is higher than spending, not counting interest payments on debt.
In its February budget, Treasury forecast a fourth surplus in a row, at 1.6% of GDP for 2026-27. It has said it does not want to tie itself to a fixed number. It is working on a law to protect sound spending principles instead.
Economists expect Treasury to show that government debt has finally peaked. They see gross debt falling to 77.5% of GDP this financial year, down from 78.9% in 2025-26.
They also expect a budget deficit of 3.8% of GDP in 2026-27. This would beat Treasury’s February forecast of 4%.
The economists expect Treasury to raise its tax income forecast for 2026-27 by R20 billion, helped by stronger mining taxes. They said the extra money could cut debt, fund infrastructure or give more relief on fuel prices.
The wars in Ukraine and Iran have strained global energy supplies and pushed local costs to record highs. Economists expect the better numbers to bring credit rating upgrades by next year.
The rand has gained almost 2% against the US dollar since 1 October. South Africa’s 10-year government bond yield has stayed steady at around 9%.
High energy prices have added to inflation and threaten economic growth. Frank Blackmore, an economist at KPMG, said mining production had come off its highs.
He said higher tax income from strong commodity prices would not last for the rest of the year.
Treasury had forecast economic growth of 1.6% in 2026. Maarten Ackerman, chief economist at Citadel, estimates growth will be just 0.8%.
“Fortunately, despite all of that, it is potentially going to be much stronger than what they expected in February,” Ackerman said of the state’s finances.
Source: this article is based on reporting by Moneyweb. Image: Moneyweb. Written with the help of AI and published by the Tzaneen Voice Business desk. See our Editorial Standards.
Anelisa Nkuna covers business and money news for Tzaneen Voice. Anelisa reports on the rand, fuel prices, interest rates, jobs, Eskom, Transnet, farming and company results. The aim is simple: explain what the numbers mean for household budgets, small businesses and workers in South Africa.