Godongwana rules out introducing new SA fiscal anchor

South African Finance Minister Enoch Godongwana ruled out introducing a new fiscal anchor in the country’s budget framework as he seeks to contain rising debt.

Africa’s most industrialised economy is expected to achieve a primary surplus — in which main budget revenue exceeds non-interest spending — of R6.7 billion, or 0.1% of gross domestic product, in the fiscal year through March. If realised, it will be the first positive primary budget balance since the global financial crisis. The surfeit will probably increase through fiscal 2026, National Treasury estimates show.

The Treasury made the primary budget balance — instead of a spending ceiling — the nation’s most critical fiscal anchor in 2021. A year later, budget review documents showed the potential for a more robust anchor was being explored, partly to ensure the government’s debt burden doesn’t return to an unsustainable trajectory.

“I don’t want to get into the game of fiscal rules, which is a first-world phenomenon,” Godongwana said in an interview Wednesday. “I’m focusing on fiscal sustainability and the ratios provide me with indicators I need for fiscal sustainability.”

A R254 billion bailout for state-owned power company Eskom means government debt will probably peak at 73.6% of GDP in fiscal 2026 — a higher level and three years later than previously expected. Debt-service costs — the fastest-growing expenditure line item for about a decade — will increase to almost 20% of main-budget revenue.

While the Treasury said it would consider various options for a new fiscal anchor, some economists expected it would heed the International Monetary Fund’s repeated calls for a debt ceiling. Both former Finance Minister Tito Mboweni and South African Reserve Bank Governor Lesetja Kganyago committed to considering the suggestion when the country sought emergency Covid-19 aid from the lender in 2020.

The Treasury has previously said achieving a primary surplus will bring multiyear fiscal consolidation efforts to a close and allow the government to “reconsider the funding of South Africa’s priorities” in a more stable environment. It’s lived up to that commitment, with Wednesday’s budget showing the Treasury isn’t proposing expenditure reductions over the next three years, said Edgar Sishi, the head of the budget office.

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