By Kopano Gumbi, Sfundo Parakozov and Wendell Roelf
CAPE TOWN, Feb 25 (Reuters) – South Africa’s government is working to enshrine in law a set of legal rules called a “fiscal anchor” to try to ensure that public finances are sustainable over the longer term, the Treasury said on Wednesday.
The rules will be outlined in the mid-term budget, which is normally presented in October or November, and will be based on principles rather than numerical targets, the Treasury said as it laid out its annual budget.
South African policymakers have been trying to boost investor confidence in Africa’s biggest economy by curbing debt and implementing reforms to enhance its growth potential.
The country is on track this fiscal year for its third consecutive primary budget surplus, meaning the government’s total tax revenues will exceed its non-interest spending.
FORMAL LEGAL BASIS WOULD IMPROVE CREDIBILITY
But Duncan Pieterse, director-general of the National Treasury, said a more formal fiscal anchor would increase the credibility of the government’s handling of public finances.
“What we want to do is ensure that we entrench it in law so that the requirement for sustainability becomes a legal one,” Pieterse told Reuters.
The Treasury said the fiscal legislation would require each new administration to put forward a medium-term plan to embed budget sustainability.
“Without sustainable public finances debt-service costs will consume ever more of the economy’s available resources, eroding investment, productive capacity and living standards,” the budget statement said.
HIGHER DEFICITS AND FALLING DEBT
Wednesday’s budget contained a slight increase in the government’s consolidated deficit forecasts for the next two years but showed debt was set to fall.
The Treasury expects a consolidated budget deficit of 4.0% of gross domestic product for the fiscal year that starts on April 1, up from a previous forecast of 3.8% of GDP.
South Africa’s gross debt-to-GDP ratio is expected to peak at 78.9% in the 2025/26 fiscal year, higher than the 77.9% of GDP projected in November, before declining to 77.3% of GDP in 2026/27.
The Treasury presented higher revenue estimates this fiscal year, helped by steady economic growth and commodity price increases.
Growth started to rise last year but is still modest, with estimates at 1.4% in 2025 and 1.6% in 2026.
(Reporting by Kopano Gumbi, Sfundo Parakozov and Wendell Roelf;Additional reporting by Anathi Madubela in Johannesburg;Editing by Olivia Kumwenda-Mtambo, Alexander Winning and Barbara Lewis)
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