The International Monetary Fund has recommended that South Africa adopt a clearer, legally backed limit on government debt to restore fiscal credibility and place the debt burden on a declining path.
In its annual Article IV assessment of the South African economy, the IMF said the spending ceilings established in 2012 contributed to fiscal restraint but were not sufficient to prevent the steady increase in public indebtedness over the past 15 years. National Treasury projections cited by the Fund show government gross debt stabilising at 77.9% of GDP this year.
Delia Velculescu, the IMF mission chief for South Africa, said the 2012 expenditure ceilings "helped support fiscal discipline, but it has not been sufficient to stop debt from continuing to rise over the last 15 years." The Fund concluded that a more explicit, binding rule would strengthen credibility and make the trajectory of debt reduction clearer.
Specifically, the IMF recommends a formal rule that would aim to bring debt down to about 70% of GDP over the medium term and toward roughly 60% over the longer term. The Fund said adoption of such a rule, if implemented, would lower the countrys borrowing costs.
The staff report followed an IMF visit to South Africa in late November and early December 2025 during which officials met with Finance Minister Enoch Godongwana, Reserve Bank Governor Lesetja Kganyago and other senior representatives. In the report released on Wednesday, the Fund outlined the elements it believes should be part of the rule.
- Limits on spending.
- Targets for the budget balance.
- Clearly defined exceptions to be triggered in the event of major shocks.
- Oversight by an independent body to enforce and monitor compliance.
The IMF expressed conditional support for the government's plan to run a primary budget surplus of 1.5% of GDP in the 2026 fiscal year - meaning revenues would exceed spending before interest payments. At the same time, the Fund warned that tighter fiscal policy would likely be needed in subsequent years to ensure that public debt declines on a sustainable basis.
On macroeconomic prospects, the IMF largely confirmed its staff projections, forecasting real GDP growth of 1.4% in 2026 and about 1.8% on average over the medium term. The Fund said this expansion would be underpinned by steady household spending and a recovery in investment associated with structural reforms.
Inflation is expected by the IMF to fall to the Reserve Banks 3% target by the end of 2027. Nevertheless, the Fund flagged downside risks to the outlook, including uncertainty in the global economy and the possibility that domestic reform momentum could slow.
The IMF noted recent positive developments in South Africas external and institutional standing. These include the country's removal from the Financial Action Task Force's grey list of jurisdictions monitored for risks related to illicit money flows, and a credit rating upgrade in November - the first in two decades.
The Fund observed that its forecasts are broadly in line with South African authorities. The Treasurys November projections showed growth of 1.2% in 2025 rising to 2% by 2028, with risks tilted to the downside, while the central bank described risks as broadly balanced.
As presented in the IMFs Article IV staff report, the recommended rule is designed to provide a predictable, enforceable framework - combining expenditure constraints and balance objectives with credible escape clauses and independent oversight - to place public debt on a clear downward path and reduce financing costs for the government.