Finance minister Enoch Godongwana’s 2026 budget projects South Africa’s borrowing requirement and gross debt-to-GDP ratio will decline over the medium term after stabilising at 78.9% in 2025/26.
This is thanks to an improvement in budget balances, a favourable inflationary environment for the government bond market and transfers from the gold & foreign exchange contingency reserve account (GFECRA).
Godongwana tabled his 2026 budget speech during a joint sitting of parliament in Cape Town on Wednesday afternoon. The budget comes as South Africa experiences rising investor confidence and its first sovereign credit rating upgrade in 16 years.
The consolidated budget deficit is expected to narrow from 4.5% of GDP in 2025/26 to 3.1% of GDP in 2028/29. The government aims to stabilise the debt-to-GDP ratio in the current year and reduce it through the rest of the decade by growing the main budget primary surplus.
Tabling the speech in parliament on Wednesday afternoon, Godongwana said the government was committed to a reform agenda and a disciplined fiscal strategy built on stabilising debt, investment in infrastructure and better spending.
“Today, that commitment has delivered tangible results. For the first time in 17 years, debt will stabilise, and it will continue to fall in the coming years. The budget deficit has narrowed significantly, and debt-service costs are also falling.
“The world has taken notice. South Africa has been removed from the Financial Action Task Force (FATF) grey list. We secured our first credit rating upgrade in 16 years. And borrowing costs have eased, creating space for growth and development. These are signals of restored credibility, of renewed resilience and of a nation regaining its footing.”
Addressing the media during the budget lock-up before the speech, Treasury director-general Duncan Pieterse said a favourable environment in the markets gave the government room to borrow at better rates.
“Throughout the last few years, we were very clear that our fiscal target, what we consider fiscal sustainability, is the peaking of debt-to-GDP in 2025/26.
“We’ve always estimated where that peak will be, but because it is so sensitive to nominal GDP revisions and changes in our borrowing activities, we were never anticipating landing on a specific number. What was critical for us was for the peak to happen in this year.”
He said this was why the 2025 medium-term budget policy statement (MTBPS) announced a R77.9bn debt-to-GDP peak and the 2026 budget announced a R78bn debt-to-GDP peak. He said this could result in higher borrowing but that it was cheaper borrowing with a lower borrowing requirement.
The Budget Review said borrowing from the Corporation for Public Deposits helped manage liquidity needs and that the borrowing requirement was expected to decline to R380bn in 2026/27 due to R56bn from GFECRA.
“The gross borrowing requirement totals R563.4bn for 2025/26, including R80bn for debt relief to Eskom. The requirement is reduced by transfers to the government of R25bn in 2025/26 from the GFECRA.”
The Budget Review said the 2025/26 gross borrowing requirement, comprising the budget deficit, maturing government debt and the Eskom debt-relief arrangement, was revised downward from R588.2bn in the 2025 budget to R563.4bn.
“In line with the fiscal strategy, gross loan debt stabilises as a share of GDP in 2025/26, at 78.9%, and will decline to 76.5% by 2028/29. The stock of gross debt is expected to increase from R6.12-trillion in 2025/26 to R6.94-trillion in 2028/29, while net loan debt … will increase from R5.9-trillion to R6.84-trillion and decline from 76.3% of GDP to 75.3% of GDP.”
The Budget Review said the 2025/26 deficit will be R12.4bn lower than projected in last year’s budget and that the government put its bond-switch programme to good use to ease refinancing pressure.
“Debt redemptions were R12.2bn lower over the same period as the government used its bond-switch programme, exchanging shorter-dated for longer-dated bonds, to alleviate near-term refinancing pressures.”
The increase in South Africa’s stock of debt is expected to be R277.4bn lower than projected in last year’s budget due to better budget balance and lower discounts on new fixed-rate bonds issued at lower interest rates.
“It also reflects reduced inflation adjustments on inflation-linked bonds, lower foreign debt due to a stronger exchange rate, and the use of cash balances and transfers from the GFECRA.”
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