Johannesburg, May 7, 2026, 22:15 SAST
South Africa’s government debt is holding its stabilization course for this year, Moody’s Ratings said, with the agency pointing to improved revenue, restrained spending, and manageable funding costs. Those factors give the country a credit-positive lean ahead of an expected ratings decision this month, even as the Iran war weighs on growth prospects.
This call is significant: South Africa hasn’t clawed back its investment grade status. Moody’s keeps the country at Ba2, stable outlook. News24 puts that at two rungs under investment grade — investors still want extra compensation for holding South African debt.
Timing matters here. South African assets started drawing more interest from investors after February’s budget beat expectations. Then came S&P Global Ratings, bumping its assessment up to BB with a positive outlook—the first upgrade like that in nearly 20 years.
Moody’s puts general government debt at a high of 86.8% of GDP for the year ending March 2026—much steeper than the National Treasury’s own 78.9% projection using its gross-debt calculation. By 2028, Moody’s expects the ratio to slip to 84.9%.
The agency projects the general government deficit shrinking to 4.3% of GDP in 2026, tightening further to 3.8% by 2027—down from 4.5% expected in 2025. For the primary surplus, it’s looking for 1.8% of GDP in 2027, topping the 1.5% it considers necessary for debt stabilization.
Back in February, Treasury’s budget speech mapped out much the same fiscal patch-up, but projected a slightly rosier debt trajectory—debt pegged to hit 78.9% of GDP by 2025/26, then easing to 76.5% come 2028/29. Finance Minister Enoch Godongwana flagged reforms around energy, logistics, and local government as pillars of the plan to revive growth.
Fiscal space is still tight. Moody’s flagged government debt stuck above 80% of GDP as a drag on shock absorption, with interest costs eating up 18.8% of general government revenue in 2025—worse than a lot of countries with similar ratings.
Right now, the big risk is tied to oil prices and the war. Moody’s figures the Middle East conflict could cut South Africa’s growth by 20 to 50 basis points in 2026 and 2027 — that’s a hit of 0.2 to 0.5 percentage points, depending on what happens with inflation and fuel prices.
George Glynos, director and head of research at ETM Analytics, told Eyewitness News that Moody’s forecast hinges on just how prolonged the conflict turns out to be. Restoring oil, shipping, gas, and fertiliser markets won’t happen overnight, Glynos said—it’s “not a flick of a switch.” He figures it could take “several months.” EWN
South African Reserve Bank chief Lesetja Kganyago echoed that sentiment this week, cautioning that policymakers need to “keep our options open” on rates while geopolitical tensions pose risks to inflation. The central bank has kept its key lending rate steady at 6.75% for the past two meetings. The next rate call lands May 28. Reuters
Moody’s is sticking with its forecast: real GDP growth climbing from 0.5% in 2024 to roughly 2% by 2028, citing stronger investment and steady consumer spending as the main drivers. The agency added that if reforms in electricity, logistics, and water hold up, growth could edge higher than 2% over the medium term.
Politics presents its own challenge. Moody’s flagged the 2027-2029 election stretch as a key trial for reforms, but still anticipates the Government of National Unity sticking it out for the full term, with little chance of a dramatic policy U-turn. South Africa’s municipal vote is set for November 4.
Moody’s isn’t popping champagne just yet. The agency says South Africa does have a plausible route to stabilising its debt, but stresses that a quicker turnaround relies on growth, following through on reforms, and how the oil shock might prompt tighter monetary policy.
