SA budget needs firm debt targets, says IMF

South Africa’s upcoming budget must deliver on debt targets to preserve confidence in public finances, and adopting a fiscal anchor would provide key assistance, said the International Monetary Fund.

Read: Investors pile into South African bonds at weekly debt sale

“Establishing a clear, well-designed fiscal rule — based on prudent debt targets — can help encourage discipline, build trust in policies, and reduce borrowing costs,” the Washington-based lender said in a country focus published on Thursday.

Enoch Godongwana.

South African Finance Minister Enoch Godongwana will deliver his 2026 budget to lawmakers in Cape Town on February 25, with investors watching for details on a potential fiscal anchor to keep public finances in check after months of consultations led by the National Treasury.

These discussions have focused on several approaches, including a principles-based rule and specific numerical targets for public finances, which operate with varying degrees of success elsewhere.

Read: Calls for higher tax-free savings limits ahead of budget

Analysts at Morgan Stanley cautioned clients in a recent note not to expect anything that binds the government to a numerical target, although that would probably be the most bullish for bonds.

The IMF also said that the budget must deliver on its goals for a primary surplus – which measures expenditure before debt-service costs – of 1.5% of gross domestic product, to show the government’s strategy of stabilizing public debt is still on track.

The National Treasury, in its November budget update, projected South Africa’s primary surplus at 0.9% of GDP in the current fiscal year, rising to 1.7% in 2026-27. Some analysts see these forecasts being revised higher next week, thanks to stronger revenue collection in recent months amid a record rally in gold prices.

Read: Slowly but surely, South Africa does seem to be turning the corner

The lender commended Godongwana for endorsing the central bank’s decision to lower its inflation target to 3% — the first adjustment to the goal in 25 years — calling it an “important milestone” and urging the authorities to maintain reform momentum.

It said continuing efforts to improve the nation’s electricity, ports, freight rail, and water infrastructure were crucial to unlocking South Africa’s economic potential.

Read: SA back from the brink, now for the hard part – Hendrik du Toit

“Our analysis indicates that closing half of the gap between South Africa and emerging market best practices in these areas could result in an increase in real output of up to a 9% over the medium term,” the IMF said. “This may support annual growth rates of up to 3%, facilitating more sustainable reductions in unemployment and public debt.”

© 2026 Bloomberg

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