South Africa’s latest Medium-Term Budget Policy Statement has secured a credit-positive rating from Moody’s, with the finance minister raising hopes for an investment-grade return by 2028. However, parliamentary watchdogs warn that weak growth targets and high unemployment threaten the country’s economic stability.
The road back to coveted investment-grade status is within reach by 2028, according to Finance Minister Enoch Godongwana. Speaking after presenting the latest Medium-Term Budget Policy Statement (MTBPS), Godongwana pointed to rising tax revenues and falling debt as a remarkable turnaround for an economy that plunged into junk status a decade ago. Bond markets reacted favorably, as the yield on the benchmark 10-year government bond fell 20 basis points to 8.72%.
Moody’s Praise and the Credit Upgrade Path
The rating agency Moody’s described the budget update as credit positive, keeping the door open for an upgrade in the coming months. Moody’s rates South Africa Ba2 with a positive outlook, noting that continued fiscal consolidation has taken place despite monetary policy tightening and weaker nominal gross domestic product growth.
Bank of America noted that Moody’s stands as the most likely agency to act, with a potential upgrade to Ba1. Investec Chief Economist Annabel Bishop observed that the MTBPS projections show a rising consolidated primary surplus even while infrastructure spending increases.
This is the second consecutive MTBPS without upward deficit revisions, adding to a track record of fiscal delivery that, if sustained, would support debt reduction and upward rating pressure.
Moody’s, via Business Day
Parliamentary Watchdogs Warn Growth Targets Will Miss Goals
Not everyone shares the optimistic view from credit agencies. The Parliamentary Budget Office (PBO) and the Financial and Fiscal Commission (FFC) warned that weak growth and mounting public finance pressures threaten development ambitions. PBO deputy director Seeraj Mohamed told a joint meeting of parliamentary committees that the National Treasury was overstating the significance of an improved sovereign risk premium given persistently weak domestic growth.
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The PBO projects real GDP growth of 1.2% in 2026, rising to 1.8% by 2029. That falls short of the government’s target of achieving economic growth above 3% by 2029/30.
Fuel Levy Relief and Global Economic Pressures
This R10 billion intervention aims to limit the pass-through into inflation.
Debt Stabilization and Future Fiscal Anchors
Moody’s expects the debt-to-GDP ratio to peak and then ease to 84.9 percent in two years. To lock in longer-term discipline, draft fiscal anchor legislation was released for public comment alongside the budget statement to provide independent oversight through the 2027-29 electoral cycle.