Finance Minister Enoch Godongwana has revealed that the government is spending a whopping R1.2-billion a day to service debt, adding that this was impacting negatively on service delivery.
Godongwana said this while delivering the 2025/2026 National Budget Speech on Wednesday.
He explained that this meant that 22% of the revenue collected in the 2025/2026 financial year will go towards servicing sovereign debt.
R1.35-trillion to service the debt
Godongwana added that this will result in the state paying R1.35-trillion to service the debt over the three-year spending period.
“A growing primary surplus means that our revenue will continue to be larger than our non-interest expenditure over the next three years. Debt-service costs will consume 22 cents of every rand collected in revenue in 2025/26,” he said.
“Debt service costs remain high, amounting to more than R1.3-trillion over the next three years. This is more than what we spend on frontline services such as health, the police and basic education.
“We must maintain our efforts to reverse this trend, and prevent the cost of debt from robbing us of resources that could otherwise be spent on pressing social needs, or to invest in growth.
Rebuilding fiscal buffers
“This fiscal strategy is how we will drive down the debt to GDP ratio, slow the growth in debt service costs and rebuild our fiscal buffers. And in this way, shield ourselves from an increasingly uncertain and unpredictable external environment,” said Godongwana.
He noted that to address the persistent fiscal imbalances in the medium to long term, government has published a discussion document on fiscal anchors. Consultations with a range of stakeholders and experts on this paper were ongoing, he added.
Godongwana added that debt-service costs are revised upward by R10.3-billion over the medium term economic framework period compared with the 2024 medium term budget policy statement.
“Debt-service cost projections have been lowered by R1.8-billion over the MTEF period, compared with the March 2025 Budget Review. These costs are projected to peak at 21.9% of main budget revenue in 2025/26.
Debt projected to stabilise at 77.4%
He said government debt was in 2025/26, government debt projected to stabilise at 77.4% of GDP.
“While this is 1.2% higher than projected in the March 12 budget, it is mainly due to lower nominal GDP.
“The main budget deficit decreases by R8-billion over the MTEF, compared to our estimates in March. This narrower deficit is enabled by the steadily expanding primary surplus.”
He said by 2027/28, the primary surplus will grow from an estimated 0.8% of GDP in this financial year to 2.1%.
Lowering gross borrowing requirements
“This contributes to lowering our gross borrowing requirements, resulting in lower debt and lower debt service costs over time.
Despite this shocking debt service cost figures, Godongwana stated that government was required to borrow R588.2-billion in 2025/26, compared to a gross borrowing requirement of R579-billion at the time of the 2024 budget speech.
Godongwana said government will borrow the funds from a combination of domestic short- and long-term loans. Also from foreign-currency loans and the use of cash balances.
