South Africa’s fiscal management has sparked talk of a possible credit rating upgrade.

Credit ratings are scores assigned to countries by agencies such as Moody’s, S&P Global Ratings, and Fitch Ratings, designed to help investors assess the risk of lending to their governments. These scores influence the interest rates against which a country borrows on international markets.

The agencies’ rating scales start at AAA, denoting the safest borrowers, with BBB as the minimum “investment grade.” A rating of BB- or lower puts countries in “junk” status, making borrowing more expensive.

In 2020, all three agencies downgraded South Africa to below investment grade amidst fears about the country’s economic trajectory. This led to the country’s borrowing costs jumping to the highest levels since the 2008 financial crisis.

The downgrades were driven by slumping growth forecasts and rising government debt projections, with Fitch projecting in 2020 that South Africa’s debt would reach 95.3% of GDP by this year.

Five years on, the numbers tell a different story. As of the 2025 National Budget, debt levels are projected at 77.4% of GDP for 2025/26 and are forecast to decline marginally into the medium-term.

Furthermore, speaking at an investment conference last week, the South African Reserve Bank (SARB) Governor Lesetja Kganyago said that: “we need a different conversation with the rating agencies,” now that: “we are having prudent fiscal, prudent monetary policy, a structural reform program that is underway.”

Bheki Mahlobo, Economics and Policy Editor at The Common Sense, says that: “the South African government has additionally recorded consecutive primary budget surpluses since 2023/24, with the surplus projected to reach 0.8% of GDP in 2025/26, 1.7% in 2026/27, and 2.1% in 2027/28. While this does not account for interest payments, it is a sign of substantive fiscal improvement.”

Mahlobo also said that: “The new inflation target of 3% set by the SARB means that investors are more likely to trust the Reserve Bank’s commitment to price stability. This helps lower the risk premium on government debt, making it less costly for the government to borrow money for public spending.”

Mahlobo advised, however, that despite the sound fiscal management, ratings agencies were likely to hold off on a credit upgrade until data suggested that South Africa’s economic growth trajectory was rising to a level near 2%.