Moody’s Ratings expects South Africa’s public debt to stabilize this year and begin a gradual decline thereafter, according to a report dated Wednesday. The agency maintained the country's sovereign rating at Ba2 with a stable outlook, citing a combination of improved revenue performance, spending restraint and easing funding costs as the key factors behind the shift in trajectory.
In its projections, Moody’s foresees the general government deficit narrowing to 4.3% of GDP in 2026 and to 3.8% in 2027, down from an estimated 4.5% in 2025. The ratings agency expects the primary budget balance to post a surplus of 1.8% of GDP in 2027, which it says exceeds the roughly 1.5% surplus it judges necessary to place government debt on a stable path.
Moody’s estimates that general government debt reached a peak of 86.8% of GDP in 2025 and anticipates a gradual decline to 84.9% by 2028. Despite this expected improvement, the agency highlights that debt levels above 80% of GDP continue to constrain the government's capacity to absorb economic shocks.
The report also flags the cost of servicing that debt as a vulnerability. Interest payments amounted to 18.8% of general government revenue in 2025, a share Moody’s characterizes as weaker than that of many countries with similar ratings. Against this backdrop, the agency points to South Africa’s move to a lower inflation target - a 3% target with a 1 percentage point tolerance band - as a mechanism that should help lower risk premia and reduce funding costs over time.
On growth, Moody’s expects real GDP to expand to around 2% by 2028, up from 0.5% in 2024. The agency attributes the improvement to rising investment and resilient consumption. It adds that sustained reforms in the electricity, logistics and water sectors could push medium-term growth potential above 2% and help attract private investment, boosting the recovery further.
Moody’s notes political risks tied to the 2027-2029 electoral cycle. The agency says the electoral period will test the durability of reforms, although it judges the likelihood of a pronounced policy reversal to be limited. Its baseline assumes the current Government of National Unity will remain intact through its term, with the African National Congress and the Democratic Alliance prioritizing stability in the lead-up to the 2029 general election.
Overall, Moody’s presents a cautiously constructive outlook: debt levels should stabilize and then fall modestly, while slower-but-positive growth and a lower inflation target could ease financing pressures. However, the agency emphasizes that high starting debt and elevated interest-payment burdens keep South Africa’s fiscal position vulnerable to shocks.
Clear summary: Moody’s sees South African government debt peaking in 2025 and stabilizing in 2026 before a gradual decline, supported by improved revenues, spending restraint and lower funding costs, though debt above 80% of GDP and high interest-payment burdens leave limited fiscal headroom.