The National Treasury has laid out plans to pursue a fiscal anchor in its 2026 Budget Review as steady economic growth, better-than-expected tax revenue and the country’s lower inflation target bolster the state’s fiscal position, putting it on track to reduce debt in the coming years.
The review showed the Treasury moving at pace to deliver on its debt stabilisation targets. It now expects gross loan debt to stabilise at 78.9% of GDP this year before declining for the rest of the decade, reducing debt-servicing costs over the medium term and supporting much-needed spending on public services.
The consolidated budget deficit, which narrowed to 4.5% in 2025/26 from the 4.7% projected in the 2025 medium-term budget policy statement (MTBPS), is on track to steadily decline over the next three years to 3.1% in 2028/29, it said.
The “turning point” for public finances comes as soaring commodity prices boosted tax revenue in the latest financial year. Overall, the expected outcome for tax and non-tax revenue was revised upward to R1.98-trillion from a R1.95-trillion estimate in the 2025 budget.
As record gold and platinum group metal prices boosted profit for precious metal miners, mining tax collections rose 29% in 2025.
Further support came from upward revisions to economic growth estimates, with GDP now expected to have grown 1.4% in 2025, compared with 1.2% projected in the 2025 MTBPS.
“For the first time in 17 years, debt will stabilise and it will continue to fall in the coming years,” said finance minister Enoch Godongwana in his budget speech.
“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’s greylist and secured its first credit rating upgrade in 16 years while borrowing costs have eased, creating space for growth and development.”
Against an upbeat backdrop, the Treasury laid out plans to pursue a fiscal anchor, a move that has been a source of friction between the GNU’s two largest members, the DA and the ANC, with the latter historically opposing it. For now, the anchor remains subject to parliamentary processes and public consultation, with more details to come in November’s 2026 MTBPS.
The IMF has long encouraged South Africa to adopt a fiscal anchor to stabilise public finances and curb debt, which has ballooned from less than 25% of the economy in 2009 to 77% in 2025. An ever-growing debt burden meant the costs of servicing it climbed from 9% to 21% over this time, draining state coffers and putting South Africa at a disadvantage to peer economies.
However, the Budget Review saw the Treasury opting for an anchor that will be “based on principles” rather than the numerical debt rule that the development finance institution recommended, which would have anchored long-term debt at about 60% of GDP, with an intermediate target of 70%. The budget indicates that the anchor will require each new administration to table a medium-term plan to maintain fiscal sustainability.
Addressing journalists at a media session, Godongwana said he did not expect the fiscal anchor to face any political friction
“We are making it clear that we are in a process of consultation, both with parliament and the public at large. The team has published a document on fiscal anchors. We will take the outcome of that to parliament and then cabinet will have a final decision on it. That’s why we’re not making any pronouncements for now, we’re just signalling that this discussion is taking place.”
The Treasury expects the primary balance, which swung to a surplus in 2023/24 for the first time since the 2008 global financial crisis, to grow to 2.3% of GDP in 2028/29, from 0.9% this financial year. As a result, the cost of servicing debt will reduce from 21.3% of revenue in 2025/26 to 20.2% in 2028/29.
Still, the Treasury proposed a contingency reserve of R5bn for the coming financial year and R32.6bn over the medium term. The relatively high figure aims to mitigate fiscal risk, as “unforeseeable and unavoidable spending adjustments have become an increasing challenge in recent years, especially due to natural disasters,” said the Treasury.
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