MTBPS update: positive budget to keep SA in upwards credit rating cycle

Revised gross revenue projections show 2026/27 at R2.398trillion, from a previous estimate of R2.345trillion, and a revenue overrun of R53bn but additional revenue spend of R47bn, and so little change in the budget deficit of -3.9% vs. 4.0% /GDP. 

Additional expenditure of R10bn is proposed for raising the contingency reserve  for an El Nino response and other risks, an upward adjustment of R10.6bn including

unforeseeable and unavoidable expenditure of R6.2bn, mostly for disaster relief.

In addition, an additional R2.2bn is provided for early retirement and voluntary exit packages for public servants who qualify, rollovers of R1.9bn from the previous financial year and a Special Appropriation Bill of R6.9bn mainly for SARS.

In February the budget deficit only narrowed by -0.1% to -4.7% of GDP for the current fiscal year (2025/26 at the time), and a -0.1% narrowing occurred for the current fiscal year again (now 2026/27) due to the usual additional expenditure.

Key is that projected debt ratios deteriorated, the gross debt ratio for 2026/27 is 78.2%/GDP (February projected at 77.3%/GDP), 2027/28 79.8%/GDP (February 77.0%/GDP), 2028/29 77.5% (February 76.5% of GDP) 2029/30 76.6%/GDP.

Debt service costs are estimated higher as borrowings rise, to 5.4% of GDP this year from 5.3%, and 5.3% of GDP next year from 5.2% and 5.4% for the following year from 5.2% while GDP itself has been revised down only slightly in nominal terms. 

That is GDP is estimated in 2026 at R8 070bn, down from R8 085bn or similar in the 2026/27 fiscal year does not on its own account for the upwards revision to the debt ratios, debt itself rises, this year and next. 

Despite the deterioration in projected debt ratios, borrowings peaked last year, the primary surplus is large, fiscal anchors to aid consolidation are incoming, and the MTBPS is consequently likely to be viewed positively by the rating agencies.

Markets anticipate that government finances will improve further on the incoming fiscal anchor announced today “a principles-based fiscal anchor to embed (in law) prudent management of the public finances across administrations”. 

“Fiscal sustainability … meet(s) … present and future expenditure and debt-service obligations … fiscal risks, without undermining macroeconomic stability … requiring an unrealistically large or abrupt future correction to revenue or expenditure”. 

“Following each general election, the Cabinet of the incoming administration will be required to approve a fiscal plan setting out its objectives, strategy, main assumptions and risks.”

“The government will be required to explain how its policy choices support fiscal sustainability and report against the plan through the Budget Review and MTBPS, including reasons for and responses to any material departures.”

“The Financial and Fiscal Commission will assess the plan. Government and Parliament must consider its advice and explain their responses to its recommendations.” 

 “The National Treasury will remain responsible for official forecasts. The framework establishes binding duties to disclose, assess and explain. Each government will retain responsibility for its fiscal choices.” 

The moderate downwards revision is growth is still potentially too high for this year and next year aiding the moderating deficit and debt ratios, but there is a large degree of uncertainty, while inflation is markedly higher, aiding ratios too.

Infrastructure received focus, with spend shifted from consumption to investment, and the MTBPS notes “South Africa could achieve better infrastructure outcomes with its existing public capita”, with elimination of corruption and wastage key.

The budget has taken place in a difficult environment but the overborrowing of the 2010s decade under state capture has been reigned in. The slight fiscal slippage in the MTBPS is due to economic realities now, a global phenomenon this year.