South African Finance Minister Enoch Godongwana will present the 2026 budget bill to lawmakers on Wednesday.
Investors in Africa's economic powerhouse are watching closely to see if the treasury can keep debt levels stable and limit borrowing without new tax shocks.
Here are the key questions for investors:
What are deficit, primary surplus and debt extremes?
Rising prices of South Africa's exports – including gold and other metals – have boosted revenues, and Morgan Stanley economist Andrea Masia said Godongwana's budget “could be one of the fastest budget documents produced by the National Treasury in many years”.
The document could provide a window into the sustainability of revenue power and how much of it the Treasury chooses to include in the baseline.
According to Goldman Sachs, the National Treasury may slightly reduce this year's fiscal deficit estimate to 4.4% of GDP from 4.5%. Nominally, this is a surplus of 1.0% of GDP, excluding debt interest payments, the bank said.
What is tax planning?
Rising metals prices and strong domestic consumption have boosted coffers, while political pressure limits tax increases.
For BNP Paribas, “there will be little or no debate right now on a tax increase”.
Markets will look for changes to individual income tax brackets, medical credits and excise taxes that could boost revenues, even if value-added tax and headline income tax rates are unchanged.
Nedbank said the tax windfall could give the Treasury some leeway to make changes to tax brackets paying according to earnings, which were not adjusted for inflation in the past two years.
a fiscal rule or anchor
The budget may include an expenditure-capping framework, which can control expenditure to the detriment of revenue growth.
In its annual economic inquiry earlier this month, the International Monetary Fund said spending limits introduced in 2012 have not stopped the debt from rising, and urged clearer and more binding limits that could outlast the current political cycle.
Will local fixed-rate bond issuance decline?
Local bonds have rallied in recent weeks as long-term debt yields have fallen to a 10-year low on optimism over rising revenues, but investors will be closely scrutinizing borrowing tables and auction guidance.
JPMorgan said it expected “a greater than 50% chance of cutting another fixed-rate South African government bond issuance”, potentially to 2.5 billion rand per week from 3 billion rand currently.
GFECRA and foreign bonds
The government can also use the Gold and Foreign Exchange Contingency Reserve Account (GFECRA) which captures gains or losses on foreign currency holdings to limit borrowing while taking advantage of rises in the price of gold.
Nedbank also expects Treasury to issue more foreign bonds to meet $4.3 billion of external maturities in FY27.