The International Monetary Fund (IMF) has recommended that South Africa adopt a clearer and more binding limit on public debt, warning that risks to the country’s economic outlook remain skewed to the downside despite signs of gradual improvement, Reuters reported on Wednesday (11).
In its annual economic assessment, known as the Article IV report, the IMF said that the spending limits introduced in 2012 had not prevented the debt from rising. The National Treasury expects gross public debt to stabilize at 77.9% of gross domestic product (GDP) this year.
The head of the IMF mission to South Africa, Delia Velculescu, said that the spending cap rule helped to strengthen budgetary discipline, “but it was not enough to halt the continuous increase in debt over the last 15 years.”
To strengthen credibility and put debt on a clear downward path, the Fund recommended that the government adopt a formal rule with the goal of reducing debt to around 70% of GDP in the medium term and to around 60% in the long term. According to Velculescu, this measure, if implemented, would reduce the country’s financing costs.
Africa’s most industrialized economy has shown signs of recovery after a period marked by governance scandals and institutional weakness, especially during the term of former President Jacob Zuma. Recent positive developments include the country’s removal from the “gray list” of the Financial Action Task Force, which monitors risks of illicit financial flows, and the first credit rating upgrade in 20 years in November.
The recommendation comes after a visit by the IMF team in late November and early December 2025, during which meetings were held with Finance Minister Enoch Godongwana, Reserve Bank Governor Lesetja Kganyago, and other senior officials.
In its report released on Wednesday, the IMF argued that the new rule should include spending limits, budget balance targets, clearly defined exceptions for large shocks, and oversight by an independent body.
The IMF also supported the government’s plan to achieve a primary budget surplus—when revenues exceed expenditures before interest payments—of 1.5% of GDP in fiscal year 2026, but warned that further fiscal tightening will be necessary in subsequent years to ensure sustainable debt reduction.
