IMF Urges South Africa To Adopt Clearer Debt Rule

Friday 20th February 2026

By inAfrika Newsroom

South Africa IMF debt rule debate sharpened after the Fund urged the government to adopt a clearer and more binding limit on public debt, warning that economic risks remain tilted to the downside despite gradual improvement. Reuters reported the IMF made the recommendation in its annual Article IV assessment.

Reuters reported South Africa’s spending ceilings, introduced in 2012, have not stopped debt from rising. National Treasury projects government gross debt will stabilise at 77.9% of GDP this year, according to the Reuters report.

The IMF’s call adds pressure ahead of fiscal decisions that will shape borrowing costs and investor confidence in Africa’s most industrialised economy. Reuters reported the Fund recommended a formal rule aimed at reducing debt to about 70% of GDP over the medium term and around 60% over the longer term.

South Africa IMF debt rule: key details

Delia Velculescu, the IMF mission chief for South Africa, said the existing expenditure ceiling supported discipline but “has not been sufficient to stop debt from continuing to rise” over the past 15 years, Reuters reported. The IMF argued that a stronger rule would bolster credibility and help put debt on a clear downward path, which could lower borrowing costs.

Reuters reported the IMF said a credible rule should include limits on spending, targets for the budget balance, clearly defined exceptions for major shocks, and oversight by an independent body. The Fund backed the government’s plan to run a primary budget surplus of 1.5% of GDP in the 2026 fiscal year, but said policy would need further tightening in later years to ensure debt declines sustainably.

The Reuters report also said the IMF broadly confirmed its macro outlook, forecasting growth of 1.4% in 2026 and about 1.8% over the medium term, supported by steady household spending and investment linked to structural reforms. It expects inflation to fall to the central bank’s 3% target by the end of 2027, Reuters reported.

South Africa has posted recent positives, including removal from the Financial Action Task Force “grey list” and a ratings upgrade in November, Reuters reported, after years marked by governance scandals and institutional weakening during the tenure of former President Jacob Zuma.

For the wider region, South Africa’s fiscal trajectory matters because it influences regional capital flows, funding conditions for corporates with Southern Africa exposure, and sentiment on African sovereign risk. Debates over a debt rule also reflect a broader policy trend in emerging markets: moving from discretionary ceilings to rule-based fiscal frameworks aimed at anchoring investor expectations.