Some economists have berated the 2026 budget, labelling it a plan that overpromises but is set to underdeliver.
Their criticism comes after National Treasury projected a higher gross domestic product growth in the coming years, as well as director-general Duncan Pieterse’s statement that sovereign debt as a share of GDP and debt service costs will decline in the coming years, while also stating that the government was raking in more debt to take advantage of favourable market rates, a position one economist said was
contradictory.
This comes as the country spends about 20% of its revenue to service debt, which is the government’s single biggest expenditure item.
Two economists who spoke to Sunday World rejected National Treasury’s assertion that the budget represented “a fiscal turning point”, arguing that at R6.1-trillion, or 78.9% of GDP, government debt is still way too high.
Economist Duma Gqubule said he could not understand Pieterse’s logic.
“You are incurring foreign currency debt because it’s cheap, which I think is a bad idea because foreign currency debt compromises our monetary sovereignty due to risks of exchange rate fluctuations, which can cause instability for a country. When it is domestic debt, it’s more
manageable.”
He said the budget provides proof that the economy has not turned the corner.
Gqubule also dismissed Treasury’s argument that it will stabilise government debt.
“Every budget since 2012, they said they would stabilise debt within two or three years, but every year since then, they have missed their targets. In 2023, they said debt would stabilise at 73.6% this year. In 2024, they said it would stabilise at 75.3% this year. In 2025 they said it would stabilise at 76.2%.”
Economist Mandla Maleka said though the budget presentation was sound, granular details immediately indicate a stretched budget that celebrates achieving a nearly 79% debt to GDP ratio as stabilisation.
“What’s hidden is that debt-service costs come from constrained revenues. Servicing debt doesn’t come from GDP, well, not directly, but from the revenue pool.
“Any revenues that commit 20% of collection to servicing debt shouldn’t be celebrated but decried as capital displacement.
He said for South Africa to reduce debt to a sustainable level of below 30% of GDP would mean no material borrowing over the next 20 years.
“That’s an impossibility.”
