The government of South Africa is working to introduce a legally binding “fiscal anchor” aimed at safeguarding long-term budget sustainability and strengthening investor confidence, the National Treasury said on Wednesday.
The proposed framework, to be outlined in detail in the mid-term budget statement expected in October or November, will be based on guiding principles rather than fixed numerical targets. Officials say placing fiscal sustainability requirements into law would enhance credibility and discipline in managing public finances.
Finance Minister Enoch Godongwana has repeatedly emphasized the need to stabilize debt and restore confidence in Africa’s most industrialized economy. Policymakers have sought to rein in borrowing while implementing structural reforms to lift economic growth.
Duncan Pieterse, director-general of the National Treasury, said embedding fiscal rules into legislation would make sustainability a legal obligation for future administrations. “What we want to do is ensure that we entrench it in law so that the requirement for sustainability becomes a legal one,” he told Reuters.
Under the proposed framework, each incoming administration would be required to present a credible medium-term plan to maintain budget sustainability. The Treasury warned that without sustainable public finances, debt-service costs could increasingly crowd out spending on investment, productive capacity, and social services.
South Africa is on track to record its third consecutive primary budget surplus this fiscal year, meaning tax revenues are projected to exceed non-interest expenditure. This milestone reflects efforts to narrow deficits and curb borrowing.
However, Wednesday’s annual budget showed slightly wider consolidated deficit projections for the next two years. The Treasury now expects a consolidated budget deficit of 4.0 percent of gross domestic product (GDP) for the fiscal year beginning April 1, up from a previous estimate of 3.8 percent of GDP.
Despite the marginally higher deficits, debt is projected to stabilize and then decline. Gross debt is forecast to peak at 78.9 percent of GDP in the 2025/26 fiscal year, compared with a previous estimate of 77.9 percent, before easing to 77.3 percent of GDP in 2026/27.
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Revenue projections have improved, supported by firmer commodity prices and steady, albeit modest, economic growth. The Treasury forecasts growth of 1.4 percent in 2025 and 1.6 percent in 2026, reflecting a gradual recovery after years of stagnation.
Analysts say the introduction of a formal fiscal anchor could help reassure investors concerned about rising debt levels and the long-term sustainability of public finances. South Africa’s debt-service costs have risen sharply in recent years, consuming a growing share of government expenditure and limiting fiscal space for development priorities.
By enshrining fiscal principles into law, authorities hope to provide greater predictability and discipline in budget planning, reduce borrowing costs, and strengthen macroeconomic stability. The move aligns with broader efforts to improve governance and restore economic momentum in a country facing persistent structural challenges, including high unemployment, infrastructure constraints, and power supply issues.
Details of the fiscal anchor’s design and implementation will be closely watched when the mid-term budget is presented later this year, as markets assess whether the new framework can deliver lasting improvements in fiscal credibility and debt sustainability.
South Africa has grappled with rising public debt and weak economic growth for more than a decade, prompting repeated efforts by the National Treasury to restore fiscal discipline and reassure investors. Sluggish growth, persistent power shortages, high unemployment, and repeated bailouts for state-owned enterprises have weighed heavily on public finances, pushing debt levels sharply higher since the late 2000s.
Gross government debt, which stood at around 26% of GDP in 2008/09, has climbed steadily and is now projected to peak at 78.9% of GDP in 2025/26. At the same time, debt-service costs have become one of the fastest-growing expenditure items in the national budget, consuming a significant share of tax revenues and limiting space for infrastructure, social services, and economic development.
In response, policymakers under Finance Minister Enoch Godongwana have pursued fiscal consolidation measures aimed at narrowing budget deficits and stabilizing debt. South Africa is on track to record its third consecutive primary budget surplus, meaning revenue exceeds non-interest spending — a key indicator of fiscal improvement.
However, growth remains modest, forecast at 1.4 percent in 2025 and 1.6 percent in 2026, constraining revenue collection and complicating debt reduction efforts. Commodity price cycles also play a significant role in revenue performance, exposing the budget to external shocks.
Against this backdrop, the proposed legal “fiscal anchor” is intended to institutionalize fiscal discipline beyond individual administrations. By embedding sustainability principles into law, the government aims to strengthen policy credibility, reduce borrowing costs, and ensure that future governments commit to medium-term budget frameworks that keep debt under control.
Fiscal anchors are used in several advanced and emerging economies to guide public spending and borrowing decisions. If effectively designed and implemented, South Africa’s proposed framework could mark a structural shift toward rules-based fiscal management, reinforcing investor confidence and macroeconomic stability over the long term.
