South Africa’s mid-term budget unpacked
Key highlights
The South African government’s overall budget deficit is forecast to improve from 4.5% of GDP currently, narrowing to 2.7% by 2028/29 – a level last achieved in 2008/09.
Finance Minister Enoch Godongwana highlighted this in tabling the 2025 Mid-Term Budget Policy Statement (MTBPS) in Cape Town on Wednesday.
Read: Godongwana’s mini budget will get a commodity windfall tax boost
He presented a more upbeat budget and fiscal position, especially considering the main budget chaos in February, which was postponed for the first time post-1994 and saw SA having three budget days, with the final budget approved in May.
The improved fiscal outlook comes amid higher tax revenues, reduced spending in some areas and lower debt-servicing costs in the wake of lower interest rates.
As expected, Godongwana announced a lowering of SA’s inflation target to 3%, in line with what the South African Reserve Bank has been pushing for. This is expected to lock-in lower interest rates over time.
“The main budget primary balance for 2025/26 is expected to outperform the 2025 Budget estimates. Revenues exceed the 2025 Budget estimate by R19.3 billion,” the MTBPS noted.
“Healthy public finances are essential to create a platform for faster growth,” Godongwana said in the forward of the 2025 MTBPS.
“They reduce borrowing costs and make more public money available for social spending and infrastructure, while encouraging private investment.
“The 2025 MTBPS shows that government is on track to achieve the fiscal targets it set two years ago to restore the health of the public finances... There are clear signs that consistent fiscal discipline is paying off in improved investor confidence. This has been aided by sound monetary policy, which has reduced inflation and inflation expectations, enabling lower interest rates,” he added.
Other key highlights and features:
The gross debt-to-GDP ratio will stabilise this year [2025/26] at 9% and reduce over the medium term.
The main budget primary surplus is forecast to grow over the 2026 medium-term expenditure framework period, reducing the anticipated borrowing requirement.
Over the rest of the decade, rising primary budget surpluses will gradually reduce debt and debt-service costs, which currently consume 21 cents of every rand in revenue.
The fiscal framework adapts to the lower inflation target, protecting real spending growth while continuing to build more sustainable public.
SA’s economy is projected to grow at an average of 8% over the medium term. However, National Treasury has lowered its GDP forecast for 2025 to 1.2% versus 1.4% in the May main budget.
Revenue collection for the first six months of 2025/26 reached 7 billion, 9.3% higher than the corresponding period last year and R17.5 billion over 2025 main budget estimates.
The in-year revenue improvement was, in part, due to once-off collections from corporations and higher household expenditure. The revenue overrun narrows the 2025/26 budget deficit and enables government to add funding for spending priorities and frontload capital.
SA’s sovereign risk premium and the outlook for borrowing costs has improved significantly during this year.
– Moneyweb
Finance Minister Enoch Godongwana highlighted this in tabling the 2025 Mid-Term Budget Policy Statement (MTBPS) in Cape Town on Wednesday.
Read: Godongwana’s mini budget will get a commodity windfall tax boost
He presented a more upbeat budget and fiscal position, especially considering the main budget chaos in February, which was postponed for the first time post-1994 and saw SA having three budget days, with the final budget approved in May.
The improved fiscal outlook comes amid higher tax revenues, reduced spending in some areas and lower debt-servicing costs in the wake of lower interest rates.
As expected, Godongwana announced a lowering of SA’s inflation target to 3%, in line with what the South African Reserve Bank has been pushing for. This is expected to lock-in lower interest rates over time.
“The main budget primary balance for 2025/26 is expected to outperform the 2025 Budget estimates. Revenues exceed the 2025 Budget estimate by R19.3 billion,” the MTBPS noted.
“Healthy public finances are essential to create a platform for faster growth,” Godongwana said in the forward of the 2025 MTBPS.
“They reduce borrowing costs and make more public money available for social spending and infrastructure, while encouraging private investment.
“The 2025 MTBPS shows that government is on track to achieve the fiscal targets it set two years ago to restore the health of the public finances... There are clear signs that consistent fiscal discipline is paying off in improved investor confidence. This has been aided by sound monetary policy, which has reduced inflation and inflation expectations, enabling lower interest rates,” he added.
Other key highlights and features:
The gross debt-to-GDP ratio will stabilise this year [2025/26] at 9% and reduce over the medium term.
The main budget primary surplus is forecast to grow over the 2026 medium-term expenditure framework period, reducing the anticipated borrowing requirement.
Over the rest of the decade, rising primary budget surpluses will gradually reduce debt and debt-service costs, which currently consume 21 cents of every rand in revenue.
The fiscal framework adapts to the lower inflation target, protecting real spending growth while continuing to build more sustainable public.
SA’s economy is projected to grow at an average of 8% over the medium term. However, National Treasury has lowered its GDP forecast for 2025 to 1.2% versus 1.4% in the May main budget.
Revenue collection for the first six months of 2025/26 reached 7 billion, 9.3% higher than the corresponding period last year and R17.5 billion over 2025 main budget estimates.
The in-year revenue improvement was, in part, due to once-off collections from corporations and higher household expenditure. The revenue overrun narrows the 2025/26 budget deficit and enables government to add funding for spending priorities and frontload capital.
SA’s sovereign risk premium and the outlook for borrowing costs has improved significantly during this year.
– Moneyweb
Comments
Namibian Sun
No comments have been left on this article