By Radarr Africa Business Desk
LAGOS, November 2 (Radarr Africa) – Moody’s Ratings has described South Africa’s Medium-Term Budget Policy Statement (MTBPS) as credit positive because fiscal consolidation is progressing despite higher oil prices, while warning that high debt-service costs remain the main constraint on cutting the deficit, The National reported.
Evan Wohlmann, a vice-president at Moody’s Ratings, made the assessment in a note on Monday, October 26, according to the report. Finance Minister Enoch Godongwana presented the MTBPS.
Moody’s rates South Africa Ba2 with a positive outlook. It expects a general government deficit of 4.3 per cent of gross domestic product in fiscal 2026 and 3.8 per cent in fiscal 2027, and thinks debt peaked in fiscal 2025 at about 86.8 per cent of GDP before easing to 84.9 per cent by fiscal 2028.
The Treasury’s consolidated deficit target for the year to March 2027 is 3.9 per cent of GDP, down from 4 per cent in the February 2026 Budget. The 2025 deficit was 4.2 per cent, The National reported.
Gross tax revenue estimates rose by R17.1 billion, or 0.2 per cent of GDP, led by corporate income tax, up R34.2 billion, and value-added tax, up R12.6 billion. Those gains offset a R30.9 billion shortfall in fuel levy revenue caused by relief measures, the report said.
The South African Revenue Service (SARS) collected R52.4 billion from its tax debt book in the first half of fiscal 2026, about 11 per cent more than a year earlier. That is short of its R126 billion full-year target.
Debt costs are the main concern. Projected debt-service costs rose by R9 billion in fiscal 2026 and by about R11 billion a year in fiscal 2027 and 2028, according to the report. Wohlmann said “high debt service costs remain the main constraint on the pace of deficit reduction”.
Moody’s described debt affordability as weak, noting that interest payments absorbed 18.8 per cent of general government revenue in fiscal 2025, higher than most similarly rated peers. It expects only a slow easing of that burden, supported by a 3 per cent inflation target and fewer bonds issued at a discount.
The agency said fiscal room to absorb shocks remains limited, and that it sees upward pressure on the rating only if the fiscal track record holds, The National reported.
S&P Global upgraded South Africa’s rating by one notch in November 2025, and Fitch did so in June 2026, according to the same report.
The South African Reserve Bank (SARB) has also been tightening policy. BusinessDay reported in September that the bank raised its repo rate by 25 basis points to 7.25 per cent, its second increase this year, with the Monetary Policy Committee voting unanimously. The National said the policy rate has risen by a cumulative 50 basis points.
SARB Governor Lesetja Kganyago was quoted by BusinessDay as saying “global shocks are clearly hurting our economy”. The bank cut its growth forecast for the year to 1.2 per cent from 1.4 per cent, and expects headline inflation to exceed 5 per cent later this year before returning to its roughly 3 per cent target toward the end of 2027.
