South Africa’s debt begins to fall; finance minister trims growth forecast and announces temporary fuel‑levy relief

South Africa’s government debt has begun to decline after stabilizing at 78.4% of gross domestic product, Finance Minister Enoch Godongwana said Wednesday as he also cut the country’s 2026 growth forecast and announced temporary fuel-levy relief for motorists and businesses.

The measures were set out in the 2026 Medium-Term Budget Policy Statement, or MTBPS, South Africa’s statutory midyear fiscal update, which Godongwana tabled in the National Assembly on Oct. 21 along with the revised fiscal framework and adjustment bills. The update matters because it resets the government’s plans for borrowing, spending and revenue before the full national budget in February, and this year it couples fiscal consolidation with short-term cost-of-living support.

“We have consistently said that debt would stabilise in 2025/26 and then begin to decline,” Godongwana said in his speech.

Godongwana said gross government debt stabilized at 78.4% of GDP in 2025/26 and is now falling. The budget deficit is expected to narrow to 3.9% of GDP this year, slightly better than the 4.0% forecast in February, and then to 2.5% by 2030. The primary surplus — the budget balance before interest payments, a key measure of whether day-to-day revenue covers noninterest spending — is projected to rise from 1.7% of GDP this year to nearly 3% by 2030.

Treasury also reported a modest improvement in the revenue outlook. Gross tax revenue for 2026/27 was revised up by R17.1 billion from the February estimate, helped by stronger collections from corporate income tax, dividends tax and value-added tax. That stronger position, Treasury said, allows R45.5 billion more in spending than projected in February.

Even so, the economic backdrop has weakened. Treasury cut its forecast for real GDP growth in 2026 to 1.2%, down from 1.6% in February. It sees growth at 1.6% in 2027 and 2.0% by 2029. The MTBPS framed the downgrade against a weaker global environment, higher oil prices and higher borrowing costs, which it said had weighed on South Africa’s outlook alongside domestic risks.

The most immediate measure for households and businesses is a temporary reduction in the fuel levy. From Nov. 4 to Dec. 1, the levy will be cut by R3.00 a liter for diesel and R1.50 a liter for petrol. From then until Jan. 5, 2027, the cut will continue at R1.50 a liter for diesel and R1.00 a liter for petrol.

“These measures will provide R10 billion in support, at a fiscal cost of R10 billion in foregone revenue,” Godongwana said.

Treasury said the relief would be funded by returning R10 billion that had previously been transferred to the Central Energy Fund to the National Revenue Fund and the contingency reserve.

The MTBPS also highlighted efforts to steer more support toward infrastructure and crowd in private capital. Treasury said the Infrastructure Finance and Implementation Support Agency, or IFISA, began operating on April 1 and is supporting projects with a potential value of more than R217 billion. Fiscal support approved through the Budget Facility for Infrastructure now exceeds R100 billion. The infrastructure bond has raised more than R14 billion since its first issuance in December 2025. Treasury also said the Credit Guarantee Vehicle, incorporated in August, has applied for an insurance license and has conditional commitments of $553 million from development partners including the World Bank as it moves toward operation in 2027.

On the institutional side, the government said it released draft fiscal-anchor legislation for public comment in October and expects to table it in Parliament in 2027. Godongwana said the measure would create a principle-based fiscal rule rather than a rigid numerical one. Treasury also published draft amendments to the Public Finance Management Act, which governs national and provincial public finances, and the Municipal Finance Management Act, which does the same for local government. The minister said the changes amount to the first comprehensive modernization of the PFMA since it was enacted and of the MFMA in 23 years.

Godongwana added that all three major global ratings agencies took positive rating actions on South Africa earlier in 2026. Treasury has said Moody’s changed the country’s outlook to positive in May and Fitch upgraded South Africa to BB from BB- in June.

The MTBPS package now goes to Parliament for consideration.