JOHANNESBURG, May 7 – Credit rating agency Moody’s Ratings said South Africa’s improving fiscal performance and reform momentum are expected to help stabilize government debt this year before a gradual decline over the medium term, according to a report released on Wednesday
The ratings agency said stronger tax revenue, spending restraint and easing funding costs are supporting the country’s fiscal outlook, although debt levels above 80% of gross domestic product continue to constrain the government’s ability to absorb external shocks.
Moody’s currently rates South Africa at Ba2 with a stable outlook.
The agency forecasts South Africa’s general government deficit will narrow to 4.3% of GDP in 2026 and 3.8% in 2027, from 4.5% in 2025. At the same time, the primary surplus is projected to rise to 1.8% of GDP by 2027, above the estimated level needed to stabilise debt dynamics.
Government debt is estimated to have peaked at 86.8% of GDP in 2025 and is expected to ease gradually to 84.9% by 2028, according to the report.
Despite the improving trajectory, debt-servicing costs remain elevated. Interest payments accounted for 18.8% of government revenue in 2025, a level Moody’s said compares unfavourably with many similarly rated economies.
The agency also said South Africa’s move toward a lower inflation target of 3%, with a tolerance band of one percentage point, could help reduce risk premiums and lower borrowing costs over time.
Moody’s expects economic growth to improve gradually, with real GDP expansion projected to rise to around 2% by 2028 from 0.5% in 2024, supported by stronger investment activity and resilient consumer spending.
Structural reforms in electricity, logistics and water infrastructure could further lift medium-term growth potential and attract additional private-sector investment, the agency said.
Moody’s added that the 2027 to 2029 electoral cycle would test the durability of reforms, though the risk of a major policy reversal remains limited. Its baseline scenario assumes the Government of National Unity will remain intact through the next election cycle as major coalition partners prioritise political and economic stability ahead of the 2029 general election.
