Godongwana optimistic rising debt will be curbed

Finance Minister Enoch Godongwana has reaffirmed government’s determination to ensure sustainable public finances puts South Africa in a stronger position to withstand unforeseen shocks like COVID-19, while creating an environment conducive to higher investment and faster economic growth.

The country’s debt remains stubbornly high, the national debt service costs is projected to be R424.9 billion, which means 5.3% of the country’s GDP will go towards servicing debt.

Nonetheless, Godongwana maintains that government’s fiscal strategy remains on track.

“As debt stabilises, a growing primary surplus will enable the government to reduce debt-service costs as a proportion of revenue.”

Speaking in Cape Town as he presented this 2025 Budget Speech, Godongwana reiterated that the budget endorses government’s commitment to raise living standards, expand infrastructure investment and stabilise debt while simultaneously maintaining support for low-income and vulnerable households.

Infographic by: Sibusiso Biyela

According to Godongwana, the cost of servicing government’s debt stops Treasury to put public finances on a stronger footing enabling government to prioritize investment over servicing debt, which now consumes 22 cents of every rand of revenue.

‘Debt-service costs will amount to R389.6 billion in the current financial year. This translates to 22 cents of every rand we raise in revenue. It is more than what we spend on health, the police and basic education,” he says.

Infographic by: Sibusiso Biyela

The speech has laid bare the country’s fiscal challenges, in spite of this, government expects to reach two important milestones in rebuilding the public finances over the next year. However, Godongwana maintains that the country’s debt will become stable, “Government debt will stabilise, at 76.2 percent of GDP in 2025/26, while the consolidated budget deficit also narrows, to 3.5 percent by 2027/28.”

In addition, Godongwana says a budget primary surplus of 0.5 percent of GDP will be achieved in 2024/25, and this will grow to 0.9 percent in 2025/26 as projected in the October 2024 Mid-Term Budget Policy Statement (MTBPS).

The consolidated budget deficit is projected to continue declining over the medium term, narrowing to 3.5 percent of GDP in 2027/28. Gross loan debt will stabilise at 76.2 percent of GDP in 2025/26. Debt-service costs will rise from R389.6 billion in 2024/25 to R478.6 billion in 2027/28, but as a percentage of revenue, debt-service costs stabilise at 21.7 per cent in 2024/25.

Infographic by: Sibusiso Biyela