South Africa’s (SA) improving fiscal performance and reform momentum should help government debt stabilise this year before gradually declining, Moody’s Ratings said in a report dated Wednesday.
Moody’s said stronger revenue, spending restraint and improving funding costs supported the credit positive shift, though debt above 80% of Gross Domestic Product (GDP) continued to limit the government’s ability to absorb shocks.
Moody’s rates SA at Ba2 with a stable outlook.
Moody’s forecast South Africa’s general government deficit would narrow to 4.3% of GDP in 2026 and 3.8% in 2027, from 4.5% in 2025.
Primary surplus is expected to rise to 1.8% of GDP in 2027, above its estimated 1.5% level needed to stabilise debt.
General government debt is estimated to have peaked at 86.8% of GDP in 2025 and is forecast to decline gradually to 84.9% by 2028, Moody’s said.
Interest payments accounted for 18.8% of general government revenue in 2025, which Moody’s said was weaker than many similarly rated peers.
Moody’s said SA’s shift to a lower inflation target of 3%, with a 1 percentage point tolerance band, should help lower risk premia and funding costs.
The ratings agency expects real GDP growth to rise gradually to around 2% by 2028 from 0.5% in 2024, supported by higher investment and resilient consumption.
It said sustained reforms in electricity, logistics and water sectors could lift medium-term growth potential above 2% and help attract private investment.
–Reuters–
