South Africa's government debt has stopped rising as a share of the economy, settling at 78.4% of GDP in the 2025/26 fiscal year, Finance Minister Enoch Godongwana said in his medium-term budget on Oct. 21, even as he cut the forecast for 2026 economic growth to 1.2% from 1.6%.

For investors in Asia who hold emerging-market debt, the statement matters on two fronts: the government cut its bond sales and said the debt ratio would now fall, and much of this year's revenue gain came from higher commodity prices that the Treasury expects to fade.

Godongwana Says Debt Ratio Has Stabilized

Godongwana told Parliament in Cape Town that the debt ratio had stabilized for the first time in nearly two decades, according to the text of the speech published by the government. Bloomberg, in a report carried by BusinessTech, said the 78.4% figure came in slightly below the February forecast and that the debt ratio is now expected to fall gradually.

The consolidated budget deficit is projected to narrow to 3.9% of GDP in the fiscal year ending March 2027, slightly better than the 4% forecast in February, according to the speech text published by the government and to Bloomberg. The version of the speech published by Eyewitness News gives a deficit of 4.3% of GDP this year against a February forecast of 4.5%, which appears to refer to a narrower budget measure. Both versions say the deficit will shrink to 2.5% of GDP by 2030.

The primary surplus, which excludes interest payments, is forecast at 1.7% of GDP this year and close to 3% by 2030. Bloomberg said that compares with 1% in 2025/26.

Much of the improvement came from tax collections. Gross tax revenue for this year was revised up by 17.1 billion rand from the February estimate, and Godongwana attributed a large part of the gain to higher commodity prices, which he said are expected to fade over the medium term. Gross tax revenue is projected to rise from 2.14 trillion rand this year to 2.53 trillion rand in 2029/30.

Spending remains under pressure. Eyewitness News reported that the government expects spending on debt costs to exceed spending on health, social development or basic education over the medium term. The budget also set aside 10 billion rand for fuel relief, the outlet reported.

Bond Sales Cut as Yields Fall

The Treasury cut its weekly sales of fixed-rate bonds by 600 million rand to 1.95 billion rand and reduced weekly inflation-linked issuance by 100 million rand to 900 million rand, according to a report by Vanguard distributed by AllAfrica. The changes take effect between Oct. 30 and Nov. 3, the report said. Bloomberg said the cut to weekly issuance was larger than the market had expected.

The 10-year government bond yield fell 12 basis points to 8.84% after the statement, while the rand gained 0.1% to 16.37 per dollar, the same report said. Godongwana told lawmakers that the currency had strengthened and become less volatile this year.

The gross borrowing requirement for 2026/27 is higher, however, at 443.2 billion rand compared with 380 billion rand forecast in February, a rise the report attributed largely to a bond buyback program.

The minister said all three major global credit rating agencies took positive rating actions on South Africa earlier this year. He also said the conflict in the Middle East had pushed up borrowing costs globally, South Africa's included, part of a broader rise in long-term yields worldwide.

Growth Remains the Weak Point

The weaker growth forecast tempers the fiscal good news. The Treasury now projects growth of 1.6% in 2027 and 2% by 2029. It also cut its estimate of global growth in 2026 to 3.1% from the 3.3% projected in January. Godongwana argued that growth could exceed 3% a year if the government sticks to its reform plans.

Those reforms center on infrastructure and power. The minister pointed to the restructuring of state utility Eskom and the creation of an independent electricity transmission operator. An infrastructure bond first issued in December 2025 has raised more than 14 billion rand, and a credit guarantee vehicle backed by development partners including the World Bank has $553 million in conditional commitments and is meant to be running by 2027, according to the speech.

Inflation is a further constraint. Eyewitness News reported that inflation is estimated at 4.4% this year, above the 3% target adopted a year earlier, and is expected to return to 3% in 2029.

The government is also changing how it sets fiscal policy. Draft legislation released for public comment in October would write fiscal sustainability into the Public Finance Management Act as a standard rather than a fixed numerical rule. Under the proposal, each incoming Cabinet would prepare a fiscal plan after a general election, and deviations would be assessed by the Financial and Fiscal Commission and explained to Parliament. The bill is expected to be tabled in Parliament in 2027.

The first test of the lighter issuance schedule comes in the Treasury's weekly bond auctions this month, under the reduced sizes, which apply from Nov. 3 at the latest.