Johannesburg — Moody’s Ratings has described South Africa’s medium-term budget policy statement as positive for the country’s credit profile, citing fiscal consolidation, tighter monetary policy and the government’s efforts to manage rising oil prices.
In a report released on Monday, the ratings agency also highlighted weaker nominal gross domestic product (GDP) growth than it had assumed in February, underscoring the challenges facing the country’s fiscal outlook.
Moody’s rates South Africa Ba2 with a positive outlook. The agency did not announce any change to the country’s credit rating.
The South African government lowered its consolidated budget deficit target for the 2026 fiscal year to 3.9% of GDP, from 4.0% previously. The revision was supported by an upward adjustment of 17.1 billion rand ($1.03 billion) to gross tax revenue.
Moody’s expects government debt to decline to 84.9% of GDP by fiscal 2028, from approximately 86.8% in fiscal 2025, suggesting that the country’s debt burden may have peaked.
However, the agency cautioned that debt affordability remains weak. Interest payments absorbed 18.8% of general government revenue in fiscal 2025, highlighting the pressure that debt-servicing costs continue to place on public finances.
The proposed legislation to introduce fiscal rules governing government budgeting and debt management was also viewed as credit positive. Moody’s noted, however, that the credibility of the framework would depend on consistent implementation, particularly in the absence of a binding numerical target.
Key Takeaway
South Africa’s revised deficit target and proposed fiscal rules have received a positive assessment from Moody’s, but the country must continue managing debt costs and delivering credible fiscal reforms to strengthen its credit profile.
Source: Reuters
Reporting: Colleen Goko
Editing: Kate Mayberry
