The National Treasury is planning to use the primary budget surplus to significantly reduce the ballooning gross debt-to-GDP in the coming years.
According to the National Treasury figures, the gross debt-to-GDP has skyrocketed to 77.9% in the 2025/2026 medium-term budget policy statement (MTBPS), from 57.1% when President Cyril Ramaphosa’s administration took over in the 2019/2020.
The debt-service costs-to-revenue have, over the same period, risen from 15.2% to 21.4%.
“Debt will stabilise this year at 77.9%. The primary budget surplus will grow from R68.5-billion in 2025/2026 to R224-billion in 2028/2029,” said Treasury in the MTBPS on Wednesday.
Borrowing rates declining
The National Treasury stated that for much of 2025, government borrowing rates have been declining. This led to a reduction in debt-service costs.
“This is in part due to positive sentiment associated with the steady improvement in the fiscal position. Over time, this will increasingly result in greater economic activity, growing investment, and rising incomes.
“This virtuous cycle — stronger public finances and lower inflation leading to higher confidence and investment, which in turn leads to lower borrowing costs and even stronger public finances and economic growth — is the key pursuit of the fiscal strategy,” said the department.
The treasury highlighted that government began running a primary budget surplus in 2023/2024. This after more than a decade of primary budget deficits.
“The surplus — where revenue exceeds non-interest expenditure — is expected to improve from 0.5% of GDP in 2023/2024 to 2.5% in 2028/2029. And the growing primary surplus enables government to stabilise and then reduce debt and debt-service costs.”
The National Treasury projected that the main budget deficit was expected to narrow from 4.6% of GDP in 2022/2023 to 2.7% in 2028/2029.
On track for fiscal targets
“The 2025 MTBPS shows that government is on track to achieve the fiscal targets it set two years ago to restore the health of the public finances. Debt will stabilise this year (2025/2026) at 77.9% of GDP. It will arrest… the long climb in the debt trajectory that began in the wake of the 2008 global financial crisis.
“Over the rest of the decade, rising primary budget surpluses will gradually reduce debt and debt-service costs. These now consume 21 cents of every rand in revenue. The main budget deficit will fall to below 3% of GDP by 2028/29,” said National Treasury.
The department explained that stronger fiscal balances and lower debt have important real-world implications.
Developmental priorities
“For many years, resources that would otherwise go to providing services have been consumed by the cost of servicing debt. The stabilisation and decline of debt-service costs will reduce this ‘crowding-out’ effect. It will also… strengthen government’s ability to allocate resources in line with developmental priorities.
“Moreover, when government debt and debt-service costs remain elevated over a long period of time, it puts upward pressure on interest rates in the whole economy, making it more costly for households and firms to obtain loans to buy assets, start businesses, or build infrastructure,” said National Treasury.
