Positive Signs for South Africa’s Budget Deficit as Treasury Forecast Looks Easier to Reach

Positive Signs for South Africa’s Budget Deficit as Treasury Forecast Looks Easier to Reach

South Africa may have reason to breathe a bit easier. New analysis suggests the National Treasury could meet or even beat its forecasted budget deficit for the 2025/26 fiscal year. That is good news for a country long under pressure from rising debt and shrinking fiscal room.

What analysts are seeing

Economists at BNP Paribas say that a combination of underspending by government and stronger than expected tax receipts means the projected gap in South Africa’s books appears more manageable. The Treasury has pegged the deficit at 4.6 percent of GDP through to March 2026. Previously some forecasts placed it closer to 4.9 percent.

While state spending is expected to catch up later in the year after delays in passing appropriation bills, there are tighter financial controls in place. The coalition government has introduced stricter regulations and budget discipline that seem to be limiting uncontrolled expenditure.

Why this matters

A smaller deficit means that South Africa may need to borrow less money. That would reduce interest costs which currently absorb a large share of revenue. Less borrowing also frees up resources that could go toward public services like health and education.

Investors generally prefer predictable budgets. If Treasury forecasts are met or improved upon, it may help in reducing borrowing costs and increasing confidence in South Africa as a place to invest.

Challenges still ahead

Despite the better-than-expected momentum, there are hurdles. Economic growth remains weak. The Treasury forecast of 1.6 percent growth for next year may be optimistic, especially with structural challenges like poor infrastructure and logistics. A recent US tariff on some South African exports adds new pressures on trade.

Finance Minister Enoch Godongwana will outline more detailed numbers when the medium-term budget update is presented on 12 November 2025.

{Source: DailyInvestor}

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