MTBPs is unlikely to see any credit rating downgrades and is positive - Investec’s Bishop

2025's Medium-Term Budget Policy Statement (MTBPS) saw debt ratios slightly higher, similar ratios for the fiscal deficit and an upwards revision to revenue projections for two years vs. May, and a lowering of the inflation target. Revised gross revenue projections now show 2025/26 at R2.005 trillion, from the previous estimate of R1.986 trillion, and a near R20 billion (R19.7bn) overrun as expected, due to higher VAT, corporate and dividend tax receipts.

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However, additional expenditure of R15.8bn is now proposed, and so the budget deficit only narrowed to -4.7% of GDP for this year (2025/26), versus -4.8% projected in May’s Budget, and the -4.5% of the Bloomberg consensus (all as a % of GDP).

The fiscal deficit projection remained at -3.8% of GDP for 2026/27 with an estimated revenue overrun of R1.4bn (Bloomberg consensus -3.9%), and -3.3% of GDP for 2027/28 (-3.3% May) but a -R17.1bn revenue underrun is projected.

Projected debt ratios deteriorated, the gross debt ratio for 2025/26 is 77.9% of GDP (May projected at 77.4% of GDP), 2026/27 77.7% of GDP (May 77.2% of GDP), 2027/28 77.4% (May 76.7% of GDP) 2028/29 77.0% (75.9% of GDP).

While the budget may appear more credit negative on the deterioration in projected debt ratios, projected debt levels are lower. The MTBPs is unlikely to see any credit rating or outlook downgrades. Instead, the budget is positive. Growth is forecast at 1.2% year on year (y/y) this year, down from 1.4% y/y in May.