Africa-Press. The International Monetary Fund (IMF) urged South Africa to adopt a clearer and more binding limit on government debt, warning that risks to the country’s economic outlook are tilted to the downside despite signs of gradual improvement.
In its annual economic assessment—known as the Article IV report—the IMF said South Africa’s spending ceilings introduced in 2012 did not prevent debt from rising. The National Treasury expects total government debt to stabilize at 77.9% of gross domestic product (GDP) this year.
Delia Velculescu, head of the IMF mission to South Africa, said the spending-ceiling rule helped support fiscal discipline, “but it was not enough to stop debt from continuing to rise over the past 15 years.”
To bolster credibility and place debt on a clearly declining path, the IMF recommended that the government adopt a formal rule aimed at reducing debt to about 70% of GDP in the medium term, and to about 60% over the long term. Velculescu said in a media briefing that implementing this recommendation would lower the state’s borrowing costs.
Africa’s most industrialized economy has shown signs of improvement after an era of governance scandals and weakened institutions, particularly during the presidency of former leader Jacob Zuma.
Recent positives include the country being removed from the “grey list” of jurisdictions under monitoring due to risks of illicit financial flows, as well as its first credit-rating upgrade in 20 years, in November.
The recommendation follows a visit by IMF staff in late November and early December 2025, and meetings with Finance Minister Enoch Godongwana, central bank governor Lesetja Kganyago, and other senior officials.
In the report published on Wednesday, the IMF said the rule should include spending limits, budget-balance targets, clearly defined exceptions for major shocks, and oversight by an independent body.
The IMF endorsed the government’s plan to achieve a primary budget surplus—meaning revenue exceeds spending before interest payments—of 1.5% of GDP in fiscal year 2026. It noted, however, that the government will need to tighten fiscal policy further in subsequent years to ensure debt falls in a sustainable way.
Overall, the IMF reaffirmed its macroeconomic outlook, projecting growth of 1.4% in 2026 and around 1.8% over the medium term, supported by stable household spending and a rebound in investment linked to structural reforms.
The IMF expects inflation to fall to the central bank’s 3% target by the end of 2027. Risks to South Africa’s outlook include uncertainty in the global economy and a loss of momentum in domestic reform efforts.
These projections broadly align with South African authorities’ forecasts. In November, the Treasury projected 1.2% growth in 2025 rising to 2% by 2028, judging risks to be skewed to the downside, while the central bank described them as broadly balanced.
