Tabling the Budget in Parliament, Finance Minister Enoch Godongwana said gross debt will stabilise as a share of GDP in 2025/26 slightly higher than previously projected before falling in 2026/27 and declining further to 76.5% by 2028/29.
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Finance Minister Enoch Godongwana has defended the government’s decision to increase borrowing this year despite assurances that public finances are stabilising.
This comes as the 2026 National Budget Review on Wednesday revealed that South Africa’s debt is projected to rise in nominal terms from R6.12 trillion in 2025/26 to R6.94trln in 2028/29.
With the gross borrowing requirement comprising the budget deficit, maturing debt and the R80bn Eskom debt-relief arrangement revised down to R563.4 billion from the R588.2bn projected in the 2025 Budget, the government is projected to borrow at an average of about R1.5bn per day.
However, Godongwana said the debt-to-GDP ratio will remain elevated before gradually declining over the medium term.
Tabling the Budget in Parliament, Godongwana said gross debt will stabilise as a share of GDP in 2025/26 at 78.9% — slightly higher than previously projected — before falling to 77.3% in 2026/27 and declining further to 76.5% by 2028/29.
He reiterated that debt will peak this year for the first time in 17 years and then enter a sustained downward trajectory, underpinned by a disciplined fiscal strategy and structural reforms.
“The slightly higher debt peak this year reflects weaker nominal GDP growth and our decision to take advantage of strong investor demand in domestic and global markets by increasing issuance in 2025/26,” he said.
In 2024, Godongwana drove home this point when he stated that South Africa’s main challenge in resolving its problems was weak economic growth, not the enormous government debt burden.
In a pre-Speech media briefing, National Treasury director-general Duncan Pieterse said the increase in borrowing this year was opportunistic rather than a sign of fiscal slippage.
Pieterse explained that as fiscal metrics improved and bond yields began to fall following policy clarity and reform commitments, government seized the opportunity to issue more debt at favourable rates.
“It presented us with an opportunity to increase borrowing in the current year in order to take advantage of favourable market conditions,” he said.
He added that from time to time government would strategically borrow more than strictly necessary because even with higher issuance, the overall debt stock can still be reduced if borrowing costs are sufficiently low.
South Africa raised slightly more than anticipated through last year’s Eurobond issuance due to favourable global market rates. Domestically, too, strong investor demand enabled Treasury to increase issuance while locking in cheaper funding.
Pieterse noted that the country faces a heavier-than-usual redemption profile over the medium term. Maintaining slightly higher cash balances by borrowing more during favourable market windows helps government manage upcoming maturities smoothly.
“Even though we are borrowing more, over the medium term our gross borrowing requirement is still lower. That’s critical. So higher borrowing, but it’s cheaper borrowing, and therefore gross borrowing requirement overall still comes down,” he said.
Addressing the upward revision in the debt peak from 77.9% projected in the Medium-Term Budget Policy Statement to 78.9% in the current Budget, Pieterse stressed that Treasury’s fiscal anchor has always been the timing of the peak rather than a specific numerical target.
Debt levels are highly sensitive to revisions in nominal GDP growth and borrowing patterns, he said, but what matters for fiscal sustainability is that the peak occurs in 2025/26 and declines thereafter, a trend that should bolster fiscal credibility and support lower bond yields.
Market analysts broadly welcomed the stabilisation narrative.
EY's chief Africa economist, Angelika Goliger, said while debt is stabilising at a higher level than originally expected in 2025/26 at 78.9%, the inflection point itself is significant.
“It marks the first credible halt to debt accumulation since the global financial crisis and provides reassurance that fiscal discipline has not been abandoned,” Goliger said.
“This matters not only for investors, but for the broader economy, where confidence has been undermined by concerns over fiscal sustainability.”
The consolidated budget deficit has narrowed to 4.5% of GDP for 2025/26, an improvement from the 4.8% estimated last year. It is projected to fall further to 4% in 2026/27 and 3.1% in 2027/28.
Jurgen Eckmann, wealth manager at Consult by Momentum, said debt stabilisation and a narrowing deficit are genuine positives for investors.
“Lower borrowing pressure and a sustained primary surplus support the case for improved market confidence and interest rate stability,” Eckmann said.
However, he cautioned that while lower inflation provides relief to consumers, it also softens nominal GDP growth, slowing the pace at which the debt-to-GDP ratio improves.
Meanwhile, the main budget primary surplus — revenue minus non-interest spending — is expected to reach 0.9% of GDP this year, rising to 1.6% next year and 1.9% in 2027/28, before reaching 2.3% by 2028/29.
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