Cape Town – South Africa's government is working to enshrine into law a set of legal rules, called “fiscal anchors” to ensure public finances are sustainable over the long term, the Treasury said on Wednesday.
The rules will be outlined in the medium-term budget, usually presented in October or November, and will be based on principles rather than numerical targets, the Treasury said as it presented its annual budget.
South African policymakers are trying to boost investor confidence in Africa's largest economy by curbing debt and implementing reforms to boost its growth potential.
The country is on track for its third consecutive primary budget surplus this fiscal year, meaning the government's total tax revenue will exceed its non-interest expenditure.
Formal legal basis will improve credibility
But National Treasury Director General Duncan Pieterse said more formal fiscal anchors would increase the government's credibility in handling the public finances.
“What we want to do is make sure we put it into law so that the sustainability requirement becomes legal,” Pieterse told Reuters.
Treasury said the fiscal legislation will require each new administration to put forward a medium-term plan to embed budget stability.
“Without sustainable public finance, debt-service costs will further consume the economy's available resources, reducing investment, productive capacity and living standards,” the budget statement said.
High deficit and falling debt
Wednesday's Budget slightly increased the government's consolidated deficit forecast for the next two years but showed the debt is set to fall.
The Treasury expects the consolidated budget deficit for the fiscal year starting April 1 to be 4.0% of GDP, 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 financial year, up from 77.9% of GDP projected in November, before falling to 77.3% of GDP in 2026/27.
The treasury presented higher revenue estimates this fiscal year, helped by steady economic growth and rising commodity prices.
Growth began to pick up last year but is still modest, projected at 1.4% in 2025 and 1.6% in 2026.