National Treasury director-general Duncan Pieterse says the primary surplus is forecast to grow from the current 1.1% of GDP.

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South Africa posted a third consecutive primary budget surplus, underscoring the government’s commitment to repairing state finances.

The continent’s largest economy recorded a better-than-expected surplus of 1.1% of GDP in the year through March, surpassing the National Treasury’s February forecast of 0.9%, director-general Duncan Pieterse said at a Citibank conference on Tuesday. A primary surplus excludes interest costs on public loans.

Government debt has now stabilised and is forecast to decline this year and over the medium term, Pieterse said, marking a key milestone in South Africa’s fiscal consolidation efforts. In the February budget, Finance Minister Enoch Godongwana forecast that debt would peak at 78.9% of GDP before easing to 68.3% by 2033/34.

“The primary surplus is forecast to grow,” Pieterse said.

In addition, tax and non-tax revenue were higher than expected when the budget was announced, while spending was lower, including on debt-service costs. This showed the government’s ability to increase revenue and contain expenditure as needed to reach its targets, Pieterse said.

The main budget deficit ended the 2025/26 fiscal year at 4.3% of GDP, compared with a previous estimate of 4.6%, and is projected to fall to 3.1% by 2029, he said.

The stronger fiscal performance reflects Godongwana’s determination to rein in public finances. Since taking office in August 2021, he’s largely resisted bailouts for debt-laden state companies unless they agree to implement structural reforms, while maintaining tight control over government spending.

The fiscal discipline may pave the way for credit rating upgrades from Fitch Ratings, Moody’s Ratings and S&P Global Ratings over the next year, Bank of America Corporation analysts Tatonga Rusike and Raghav Adlakha said in a note to clients on Monday.

Moody’s recently revised South Africa’s outlook to positive while affirming its Ba2 rating, two notches below investment grade. S&P maintained its BB rating, also two levels below investment grade, and retained a positive outlook after upgrading the country in November.

Treasury’s twin objectives of stabilising and reducing the debt-to-GDP ratio while increasing the primary surplus – the de facto fiscal anchors in recent years – will be reinforced by the introduction of a formal rule, Pieterse said.

“This will provide a permanent, binding mechanism to lock in the fiscal gains achieved in recent years, strengthening policy credibility and further lowering our risk premium,” he said.