South Africa’s Oct. 21 budget update will show whether the government still expects its debt ratio to decline and what it projects for the deficit, a fiscal test that may influence future credit rating decisions and borrowing costs.
Finance Minister Enoch Godongwana’s February budget put gross government debt at 78.9% of gross domestic product in fiscal 2025/26 and projected a decline to 77.3% in 2026/27. It forecast a consolidated deficit of 4% of GDP in 2026/27. The new Medium Term Budget Policy Statement will provide the next official reading on those projections.
National Treasury has said a stronger sovereign rating could make financing cheaper for the government, companies and households. A positive rating outlook does not guarantee an upgrade.
Moody’s Ratings affirmed South Africa’s Ba2 rating in May and changed its outlook to positive. It estimated a primary budget surplus of about 1% of GDP for the fiscal year ended March 2026. The agency said it could raise the rating if sustained primary surpluses and lower debt servicing costs supported a credible, material decline in its general government debt burden, a measure distinct from Treasury’s gross government debt ratio.
Moody’s cited stronger revenue and spending restraint but also pointed to weak growth and infrastructure constraints. S&P Global Ratings has maintained a positive outlook since November 2024. It raised South Africa’s rating in November 2025 and affirmed it in May 2026. Fitch Ratings raised its rating to BB in June and retained a stable outlook.
The cited foreign-currency ratings from all three agencies remain two steps below investment grade. Even a one-step increase would leave South Africa below that threshold.
Bloomberg reported that four of 11 economists it surveyed expected an upgrade by the end of 2026. Surveyed economists forecast a fiscal 2026/27 deficit of 3.8% of GDP and a debt ratio of 77.5%. Those are economists’ estimates, separate from Treasury’s February projections.
Godongwana said in February that he aimed to propose a principle-based fiscal anchor in the budget update. He is scheduled to present the statement in Cape Town on Oct. 21 at 8 a.m. ET (12:00 UTC).
