New debt rule for South Africa in the works
South Africa will propose binding guidelines later this year to keep public finances on a sustainable path by introducing a principle-based fiscal anchor rather than numerical rules.
“The anchor will require each new administration to table a medium-term budget plan to maintain fiscal sustainability,” the National Treasury said in its 2026 Budget Review on Wednesday.
Details may be outlined in October, when the country’s mid-term budget is presented. The goal is to make the obligation binding in law.
A fiscal rule has long been debated to counter the disastrous explosion in South Africa’s borrowing over the past two decades.
The debt ratio as a percentage of gross domestic product more than tripled after the 2008 global financial crisis and years of feeble economic growth, driving borrowing costs to around 21% of total revenue in the current fiscal year from less than 9%.
Analysts said before the budget that a principles-based debt rule would be a softer option than tying the government down to hard targets on the budget deficit.
Technically, a numerical rule is a bad idea, Treasury Director-General Duncan Pieterse said at a pre-budget briefing.
“If you look around the world and if you look at how countries regularly violate numerical targets or structure exemptions around numerical targets,” he said. “We don’t believe that it is credible.”
The review didn’t spell out how fiscal sustainability would be defined. But it did say that each new government would have to table a plan to ensure the fiscal position is sustainable, and that an appropriate metric is selected to measure compliance.
Examples of such metrics may include a fiscal surplus or a debt-to-GDP ratio, said Budget Office Head Edgar Sishi.
Debt over the life of the administration must be sustainable or in decline, he told Bloomberg, and the proposal will include recommendations for a council to hold the government to account.
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