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South Africa\u2019s latest budget painted an encouraging picture of improving public finances, according to Moody\u2019s Ratings, while cautioning that \u201cmeaningful\u201d debt reduction will require stronger economic growth.<\/p>\n
The budget \u201cconfirms South Africa\u2019s strong fiscal performance, underpinned by broad-based revenue growth, and points to improving fiscal prospects,\u201d said Evan Wohlmann, vice president-senior credit officer at Moody\u2019s.<\/p>\n
Finance Minister Enoch Godongwana\u2019s annual budget presentation on Wednesday showed debt and debt-service costs peaking this year and then declining, helped by surging precious-metals prices that have boosted government revenue. The rand and government bonds rallied.<\/p>\n
In his speech to lawmakers in Cape Town, the minister said the world had taken note, citing S&P Global Ratings\u2019 decision in November to grant South Africa its first upgrade in two decades.<\/p>\n
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That lifted S&P\u2019s assessment to BB from BB-minus and also put it on a positive outlook, which South African officials said was as good as two ratings upgrades.<\/p>\n
The move raised hope that the country is on track to restore the investment-grade rating it lost as public finances deteriorated under former President Jacob Zuma, whose tenure in office was marred by corruption scandals, mismanagement, and soaring debt levels. Moody\u2019s rates South Africa Ba2 \u2014 two notches below investment grade.<\/p>\n
National Treasury Director-General Duncan Pieterse said his team was actively engaging credit-rating companies to encourage them to recognise the country\u2019s progress.<\/p>\n
Read our comprehensive\u00a0Budget 2026 coverage here.<\/p>\n
\u201cWe have taken a much more proactive approach, interrogating the modelling of some of the ratings agencies, questioning some of those assumptions and making our case of fiscal credibility,\u201d he told reporters in Cape Town. \u201cOver time, hopefully, that will assist in the potential for ratings upgrades.\u201d<\/p>\n
Moody\u2019s cut South Africa to junk in 2020, after similar moves by S&P and Fitch several years before. While it\u2019s upbeat about the outlook after the budget, it stressed the need for stronger economic growth.<\/p>\n
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\u201cSouth Africa\u2019s fiscal space to absorb shocks will remain limited,\u201d Wohlmann said. \u201cWe expect general government debt will remain above 80% of gross domestic product in the coming years and meaningful debt reduction likely hinges on growth exceeding our baseline.\u201d<\/p>\n
Others agreed that the ratings companies will want to see tangible results before upgrading their assessments.<\/p>\n
\u201cWe expect that if GDP growth improves in first half 2026, a positive outlook from Fitch and Moody\u2019s might emerge toward the year-end,\u201d said Citigroup\u2019s South Africa economist, Gina Schoeman.<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
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