South Africa\u2019s 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.<\/p>\n
Read:\u00a0Investors pile into South African bonds at weekly debt sale<\/p>\n
\u201cEstablishing a clear, well-designed fiscal rule \u2014 based on prudent debt targets \u2014 can help encourage discipline, build trust in policies, and reduce borrowing costs,\u201d the Washington-based lender said in a country focus published on Thursday.<\/p>\n
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<\/p>\nEnoch Godongwana.<\/p>\n<\/div>\n
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.<\/p>\n
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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.<\/p>\n
Read: Calls for higher tax-free savings limits ahead of budget<\/p>\n
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.<\/p>\n
The IMF also said that the budget must deliver on its goals for a primary surplus \u2013 which measures expenditure before debt-service costs \u2013 of 1.5% of gross domestic product, to show the government\u2019s strategy of stabilizing public debt is still on track.<\/p>\n
The National Treasury, in its November budget update, projected South Africa\u2019s 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.<\/p>\n
Read: Slowly but surely, South Africa does seem to be turning the corner<\/p>\n
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The lender commended Godongwana for endorsing the central bank\u2019s decision to lower its inflation target to 3% \u2014 the first adjustment to the goal in 25 years \u2014 calling it an \u201cimportant milestone\u201d and urging the authorities to maintain reform momentum.<\/p>\n
It said continuing efforts to improve the nation\u2019s electricity, ports, freight rail, and water infrastructure were crucial to unlocking South Africa\u2019s economic potential.<\/p>\n
Read: SA back from the brink, now for the hard part \u2013 Hendrik du Toit<\/p>\n
\u201cOur 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,\u201d the IMF said. \u201cThis may support annual growth rates of up to 3%, facilitating more sustainable reductions in unemployment and public debt.\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
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