By Radarr Africa Business Desk
LAGOS, October 27 (Radarr Africa) – Moody’s Ratings said South Africa’s latest medium-term budget policy statement is credit positive, adding that government debt “has probably peaked,” Reuters reported on Monday.
In a report released on October 26, Moody’s kept South Africa at Ba2 with a positive outlook and announced no rating action, according to Reuters, which was carried by CNBC Africa.
The agency cited three reasons for its assessment: tighter monetary policy, continued fiscal consolidation despite higher oil prices, and weaker nominal gross domestic product (GDP) growth than assumed in the February budget. Reuters said Moody’s noted that debt affordability remains weak.
The statement cut the consolidated deficit target for fiscal 2026 to 3.9 per cent of GDP from 4.0 per cent, Reuters reported. It also raised the forecast for gross tax revenue by R17.1 billion ($1.03 billion). Government debt is forecast to fall to 84.9 per cent of GDP by fiscal 2028, from about 86.8 per cent in fiscal 2025, according to the report. Interest costs took 18.8 per cent of general government revenue in fiscal 2025.
Moody’s also commented on draft legislation that would set fiscal rules for budgeting and debt. Reuters said the agency described the draft as credit positive, but that without a binding numerical target its credibility would depend on consistent application.
Business Day reported on October 17 that Finance Minister Enoch Godongwana was due to table the statement in a joint sitting of parliament, with the release cited as October 21, against a backdrop of the US-Iran war and cost-of-living strain.
The newspaper said Bank of America estimated that 2026/27 revenue could beat budget assumptions by R70 billion, driven by corporate tax from gold and precious metals, and forecast a deficit of 3.5 per cent of GDP against the government’s 3.7 per cent target. PSG chief economist Johann Els said: “The tax overrun could reach R50bn or more.” He expected the deficit to narrow to about 3.5 per cent of GDP, compared with 4 per cent in the February budget.
Business Day set out the expected calendar for the three main agencies. It said Moody’s update was expected in late November 2026 and that the agency was the most likely to act, with a possible upgrade to Ba1. S&P, which upgraded South Africa in November 2025, is also due in late November, with an upgrade to BB+ described as a closer call. Fitch upgraded the country to BB in June 2026 with a stable outlook, and its next update is expected in December.
Bank of America said an S&P upgrade to BB+ would likely bring a BBB- local-currency rating but would not restore investment-grade foreign-currency status, Business Day reported.
Treasury Director-General Duncan Pieterse told the Citi Emerging Markets Macro and Credit Conference that Treasury planned to introduce a formal fiscal rule at the October statement to reinforce debt-reduction and primary-surplus targets, according to a Zawya report that carried no publication date. He said Treasury was “not yet where we want to be,” and that borrowing costs had eased, with domestic bond yields falling by an average of 240 basis points between the 2025 and 2026 budgets and five-year Eurobond spreads narrowing from 170 to 106 basis points.
Reuters converted the rand figures at an exchange rate of R16.6147 to the dollar.
