Positive Signs For SA’s Budget Deficit As Treasury Forecast Looks Easier To Reach

The Post On Sunday

South Africa, long weighed down by a stubborn fiscal deficit and ballooning public debt, may finally be seeing glimmers of hope on the horizon. New projections suggest that the National Treasury could meet, or even surpass, its budget deficit target for the 2025/26 fiscal year, offering a rare moment of optimism for a government under constant financial strain.

For years, the country’s economic story has been dominated by sluggish growth, weak revenue collection, and ever-increasing borrowing needs that have crowded out essential public spending. The forecasted deficit of 4.6% of GDP through March 2026 was initially regarded with skepticism by many analysts, some of whom expected it to widen to nearly 4.9%. Now, however, the outlook appears somewhat less daunting.

According to economists at BNP Paribas, two key dynamics are working in the Treasury’s favor: underspending by government departments and stronger-than-expected tax collections. A series of delays in passing appropriation bills earlier this year has slowed expenditure, while corporate tax receipts, buoyed by a modest recovery in commodity prices, have exceeded expectations.

Although spending is likely to accelerate as the fiscal year progresses, the coalition government has signaled a determination to rein in excesses. Stricter financial regulations and tighter budget controls, introduced after years of fiscal indiscipline, appear to be limiting the uncontrolled expenditures that previously widened the deficit.

If the Treasury manages to stay within its target, the implications could be significant. A narrower deficit means the government will need to borrow less, reducing the crushing burden of interest repayments that already consume a large share of public revenues. With lower borrowing costs, more fiscal space could be freed up for public services such as healthcare, education, and infrastructure maintenance, sectors that have suffered from years of neglect.

Moreover, fiscal credibility is an asset in itself. Predictable and disciplined budgeting reassures investors, strengthens the rand, and lowers the risk premium on government debt. For a country battling capital outflows and competing for foreign investment, credibility can be as valuable as cash.

Still, the road ahead is far from smooth. Economic growth remains the Achilles’ heel of South Africa’s fiscal outlook. Treasury has projected 1.6% growth for 2026, but many economists warn that this estimate may be too optimistic. Chronic weaknesses in energy supply, rail and port logistics, and an unstable policy environment continue to choke productivity.

External shocks are also mounting. The recent imposition of US tariffs on selected South African exports could further dampen trade, threatening an already fragile manufacturing sector. Without stronger and more inclusive economic growth, even the most disciplined budgeting may struggle to reverse the long-term trajectory of rising debt.

All eyes are now on Finance Minister Enoch Godongwana, who is expected to provide a more detailed fiscal update in the medium-term budget statement on 12 November 2025. His presentation will be closely scrutinized, not just by markets and rating agencies, but also by a weary South African public desperate for signs of stability.