South Africa's fiscal outlook brightens slightly ahead of 2025 MTBPS

FINANCE Minister Enoch Godongwana is expected to deliver a cautiously optimistic Medium-Term Budget Policy Statement (MTBPS) on Wednesday, showing stronger revenue collection, contained expenditure growth, and a smaller-than-expected deficit, even as sluggish growth and high debt remain major fiscal challenges.

- SIPHELELE DLUDLA

According to Nedbank's economist, Isaac Matshego, the budget deficit is projected to narrow to 4.4% of GDP in FY2025/26, down from the 4.8% estimated in Budget 2025, thanks to higher-than-anticipated tax revenues and disciplined spending.

“Revenue growth has been boosted by robust collections in personal, corporate, and value-added taxes,” Matshego said last week, noting that gross tax revenue could overshoot earlier estimates by R60 billion in FY2025/26 and as much as R200bn over the medium term.

Available government finance figures for the fiscal year to date show a modest improvement in revenues when compared to the same period last year.

The South African Revenue Service (Sars) collected R47.1 billion in overdue taxes during the first six months of the fiscal year, raising its recovery target to R135bn. Improved efficiency, firmer domestic demand, and high precious metal prices helped lift collections.

Investec economist Lara Hodes also said they were expecting revenue receipts to increase further on the rally in precious metal commodity prices.