BUDGET 2025 | Gross borrowing requirement overshoots 2024 projections, but 'will decline'

Finance minister Enoch Godongwana admitted in his Budget Review that the government’s gross borrowing requirement and debt-service costs are higher than what was expected in the previous year, but said they will decline in the coming years.

Tabling the budget to a joint sitting of parliament on Wednesday, Godongwana said last year the economy grew by only 0.6% and over the medium term growth was projected to average 1.8%.

“To meet our goals for redistribution, redress and structural transformation, the economy needs to grow much faster and in an inclusive manner. This is the central objective of the current administration. Today’s budget proposes a bold and pragmatic approach to achieving this formidable task,” he said.

He told the joint sitting that a primary budget surplus of 0.5% of GDP would be achieved in 2024/25, while the consolidated budget deficit would narrow to 3.5% by 2027/28.

As debt stabilises, a growing surplus will enable government to reduce debt service costs.

According to the Budget Review, total consolidated government spending is expected to grow at an average annual rate of 5.6%, from R2.4-trillion in 2024/25 to R2.83-trillion in 2027/28.

“Debt-service costs are higher than estimated in the 2024 medium-term budget policy statement due to the annual budget deficit, elevated interest rates and a weaker exchange rate. Over the medium-term expenditure framework period, government will spend more on debt-service costs than on health, basic education or social development,” the review said.

The Budget Review said while the gross borrowing requirement declined during the previous year’s budget period, the 2025 gross borrowing requirement is expected to be higher than projected in that year.

“The gross borrowing requirement has declined from R457.7bn at the time of the 2024 budget to R415.7bn in 2024/25, largely due to lower debt redemptions as a result of government’s bond-switch programme.

“In 2025/26, the gross borrowing requirement is expected to be R3bn higher than projected in the 2024 Budget Review due to a higher budget deficit, partially offset by a reduction in Eskom debt relief.”

The Budget Review said in 2025/26, the gross borrowing requirement will amount to R582bn, including payments to Eskom of R80.2bn, which is R30bn lower than the 2024 budget estimate.

“The requirement is also affected by the transfer to government of R100bn in 2024/25 and R25bn in each of the two following years from the Gold and Foreign Exchange Contingency Reserve Account, as discussed in the 2024 Budget Review.”

The review said the borrowing requirement is expected to decline to R441bn in 2026/27, then increase to R600bn in 2027/28, while domestic and foreign redemptions increase from R172.8bn in 2025/26 to R303.7bn in 2027/28.

The Budget Review said gross loan debt is expected to stabilise at 76.2% of GDP in 2025/26, slightly higher than the 75.3% projected in the 2024 budget, before declining.

Debt-service costs will stabilise at 21.7% of revenue in 2024/25 and decline thereafter.

Government debt rose from R1.79-trillion in 2014/15 to R5.26-trillion in 2023/24, meaning in inflation-adjusted terms public debt per working-age individual climbed from R70,074 in 2014/15 to R114,976 in 2023/24.

In accordance with the documents which were distributed to economists and journalists in February, the National Treasury expects GDP growth to average 1.8% over the medium-term.