National Treasury has come up with tough proposals that will result in legislation changes to rein in unsustainable public sector practices that have resulted in wastage and runaway government debt.
The proposal, announced in the 2026 Budget Review, comes as debt service costs increase to R432.4-billion in 2026 from R426-billion in 2025.
This was revealed in the 2026 Budget Review, showing that government was spending R6-billion more than last year on debt-service costs. Money which the state could have channelled towards service delivery and job creation.
Largest expenditure in the national budget
This also means government is forking out about R1.2-billion a day to service the ever-growing debt, currently at 78.9% of the GDP. And it is the largest single expenditure item in the national budget.
In a candid statement, National Treasury director general Dr Duncan Pieterse described practices that have led to the ballooning government debt as unsustainable and damaging to national development.
To nip the practices in the bud, he stated that the department, in consultation with Cabinet, will undertake detailed analytical work to prepare legislation to anchor sound fiscal principles in law.
“Adopting such an approach is intended to avoid unsustainable practices that damage national development. In particular, the proposal is informed by recent experience.
“Since 2008/2009, government’s debt ratio has more than tripled. Debt-service costs have risen from 8.8% of revenue to 21.3% in 2025/2026. Thus crowding out other spending.
“It has taken a large-scale consolidation effort to rein in debt for the benefit of all South Africans,” said Pieterse.
He touched on other challenges stemming from a high debt environment.
“Fiscal policy balances the need to narrow the budget deficit and reduce debt with the obligation to protect public services and support the economy.
“Low growth and high debt service costs have made this balance difficult. But it remains the most sustainable policy stance.”
Debt ratio to decline
Pieterse was optimistic, saying the debt ratio would decline this year as government remains on course to restore the health of the public finances.
He gave economics history lesson, tracing back the long stretch of rising public debt to the wake of the 2008 global financial crisis. This debt, said Pieterse, imposed significant costs on our country. It consumed enormous resources that could have been better used to build our economy and strengthen public services.
“That period of rising debt has come to an end,” wrote Pieterse in the Budget Review. He vowed that the debt ratio will stabilise in this financial year, and decline thereafter.
“This will reduce medium-term debt-service costs as a share of revenue and support the sustainable provision of public services,” he said.
“There is broad agreement in the government of national unity on this transition to a higher-growth economy through targeted reforms and investments.
“This budget also recognises that we need stronger economic performance to improve the lives of the [impoverished] and vulnerable in our society,” said Pieterse.
Boost for funding for key services
He said public debt was stabilising this financial year and will decline thereafter. Thus enabling government to protect funding for key public services.
“Lower borrowing costs and an improved inflation outlook following the decision to reduce the inflation target to 3% will also encourage private investment and job creation.
“Going for growth means maintaining macroeconomic stability. Also speeding up structural reforms in water, transport and electricity; boosting state capability; and increasing public infrastructure investment,” he said.
Medium-term fiscal policy is anchored by the primary budget surplus. This means revenue exceeds non-interest spending. and this surplus continues to grow over the next three years, placing public debt on a sustainable path.
He said debt as a share of GDP will decline marginally over the next three years. And the cost of servicing that debt will reduce from 21.3% of revenue in 2025/2026 to 20.2% in 2028/2029.
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