Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS) paints a more optimistic fiscal picture for South Africa, highlighting rising revenues, stabilising debt, and a sustained primary budget surplus, but with economic growth still lagging behind fiscal gains.

The highlights are:

• That South Africa has maintained a primary budget surplus since 2023/24 and that this surplus continues to expand;
• That government expenditure levels have undershot projections, whilst revenue forecasts have lifted;
• The budget deficit is expected to narrow;
• Government debt levels are projected to stabilise and reduce;
• That South Africa’s debt service costs are projected to reduce as global interest rates have fallen and South African bond prices have risen, driving down yields;
• Economic growth is expected to lift modestly into the medium term;
• That the rand has strengthened against a weakening dollar;
• That the inflation target will be reduced to focus on a rate of 3%; and
• That South Africa has come off the Financial Action Task Force (FATF) grey list.

In terms of hard numbers, the minister revealed that:

• The primary budget surplus has been revised up to R68.5 billion or 0.9% of GDP from a projected R65 billion or 0.8% in May, and is projected to rise to 1.7% in 2026/27 and 2.1% in 2027/28 and reach 2.5% in 2028/29;
• Main government revenue has been revised up to R1.97 trillion or 25.3% of GDP, an improvement from the R1.95 trillion or 24.8% projected in May. Revenue is projected to rise further to 25.6% in 2026/27, remain the same in 2027/28 and rise to 27.7% in 2027/28;
• Main government expenditure is projected to come in at R2.32 trillion or 29.8% of GDP, compared to the projected R2.31 trillion or 29.4% of GDP in May. Expenditure is expected to decline to 29.2% in 2026/27, reach 28.8% in 2027/28 and decline further to 28.5% in 2028/29;
• The gap between government expenditure and revenue is known as the budget deficit. The deficit has been revised lower to R363.4 billion or -4.7% of GDP, compared to a May estimate of R377.9 billion or -4.8%. It is expected to narrow further to -3.8% in 2026/27, reach -3.3% in 2027/28 and -2.9% in 2028/29;
• Government debt has been revised up to 77.9% in 2025/26 from 77.4% in May, and is expected to decline to 77.7% in 2026/27, reach 77.4% in 2027/28 and 77.0% in 2028/29;
• Debt service costs are expected to reduce from the R426.3 billion or 5.4% of GDP projected in May to R421.5 billion or 5.4% of GDP and is expected to decline to 5.3% in 2026/27, remain the same in 2027/28 and reach 5.3% in 2028/29;
• On the economic growth outlook, the treasury has revised economic growth to 1.2% from a projected figure of 1.4% in May, and the figure is forecast to reach 1.5% in 2026, 1.8% in 2027 and 2.0% in 2028.

Bheki Mahlobo, Economics and Policy Editor at The Common Sense, said: “The 2025 MTBPS demonstrates that South Africa’s fiscal position is significantly stronger than most analysts expected after the COVID-19 pandemic. We continue to see a high measure of fiscal prudence, reflected in the curbing of the debt trajectory and the narrowing deficit. This will lift confidence in South African bonds. The key missing ingredient from the economic mix now is growth. If the growth rate were to lift towards 2% I am confident that South Africa would secure a ratings upgrade.”