South Africa will rely more heavily on its domestic bond market to refinance a maturing debt load, its Treasury said in the medium-term budget policy statement. The department’s statement further said that although domestic borrowing would likely decline slightly to 256.5 billion rand (USD 14.8 billion) in the 2026/27 fiscal year, it will rise to 412 billion rand in the 2026/27 window. It will then drop, but will remain at elevated levels.
This outlook will coincide with the redemption of bonds, which are maturing and require repayment, averaging approximately 208 billion rand annually in the coming years. To meet these obligations, the Treasury plans fresh debt issuance, to adjust repayment schedules or implement deeper spending cuts.
The Treasury will continue with “bond switches,” allowing investors to exchange bonds nearing maturity for longer-term instruments. While this mitigates short-term repayment pressure, it does not reduce overall debt levels.
Investors have been forecasting reduced weekly bond auction sizes. The Treasury previously signalled cuts would only occur if lower issuance proves sustainable rather than temporary.
In terms of external borrowing, South Africa raised USD 2.6 billion of the projected USD 5.3 billion for 2025/26 from multilateral development banks. It will raise the balance of USD 2.7 billion in global markets.
“Additionally, the Treasury plans to leverage South Africa’s gold and foreign exchange account to ease future borrowing. The buffer stood at 364 billion rand by March 31, well above the target of 260 billion rand. After allocating 50 billion rand from the account earmarked for the current fiscal year, funds totalling 31 billion rand will be utilised in 2026/27 to curb borrowing requirements,” reported Reuters.
Meanwhile, in his Medium-Term Budget Policy Statement (MTBPS) speech, Finance Minister Enoch Godongwana stated that his country’s focus will now be on growing the economy faster and attracting the investment needed to create jobs and improve the lives of all South Africans.
“Two years ago, we committed to stabilising public debt in the current year and then begin to reduce it. Despite a challenging environment of persistently low economic growth, we are on track to achieve this goal. We are also committed to removing South Africa from the Financial Action Task Force grey list. We have delivered on this commitment in just two and a half years. This is thanks to collaboration across government departments, law enforcement agencies and the private sector. Exiting the grey list enhances South Africa’s attractiveness to investors and makes it easier to do business with us,” Godongwana said.
The above-mentioned achievements have helped the government to not only lower the bond yield curve, but also to reduce the risk premium for owning government bonds, resulting in the freefall of debt servicing costs. As per Godongwana, this will lead to an improvement in South Africa’s credit rating.
Foreign participation in domestic bond auctions has grown from 24.8% in April 2025 to 26.8% in September 2025. This increase was supported by lower global risk aversion and improved sovereign risk perceptions, bolstering demand and lowering yields. During this period, credit rating agencies reaffirmed South Africa’s sovereign ratings and outlook, citing progress on fiscal consolidation and stronger external balances.
This has already led to lower debt service costs as debt service costs in the current year will be 4.8 billion rand lower than estimated in the 2025 Budget, supported by lower interest rates, lower inflation and a stronger currency.