South Africa's Treasury Outlines Spending Plans to Tackle Rising Debt

National Treasury said the government's fiscal strategy remains centred on increasing the primary budget surplus, where revenue exceeds spending excluding interest payments.

South Africa's National Treasury has unveiled a new framework aimed at helping government departments spend public money more efficiently while ensuring taxpayers receive better value from public services.

The guidelines form part of preparations for the 2027 Medium-Term Expenditure Framework (MTEF), which outlines government spending plans over the next three years. At a time when economic growth remains subdued and public finances remain under pressure, the Treasury wants departments to focus resources on priority programmes while cutting wasteful or ineffective spending.

A major objective is to stabilise and gradually reduce South Africa's debt burden, which has become one of the country's biggest fiscal challenges. Interest payments on government debt currently consume nearly one-fifth of all tax revenue, limiting the funds available for essential services and development programmes.

Departments Told to Prioritise Savings and Efficiency

National Treasury said the government's fiscal strategy remains centred on increasing the primary budget surplus, where revenue exceeds spending excluding interest payments. Achieving this goal would reduce the need for additional borrowing and help place public finances on a more sustainable path. Departments have been instructed to first look within their existing budgets when facing new spending pressures. Programmes that consistently fail to meet their objectives or demonstrate poor performance may face funding cuts or be phased out altogether.

A key tool in this process is the Targeted and Responsible Savings (TARS) initiative, introduced during the previous MTEF cycle. The programme seeks to identify projects that are no longer delivering sufficient value and redirect resources towards higher-priority areas.

Departments must also use the Programme Assessment Matrix (PAM), a performance evaluation tool designed to measure whether government programmes and public entities are achieving their intended outcomes. Treasury has made it clear that additional funding requests will only be considered if corresponding savings are identified elsewhere through the TARS process.

Debt Reduction Remains Government's Main Fiscal Goal

The guidelines emphasise that any unexpected increase in government revenue will not be used to create new permanent spending commitments. Instead, such gains will be directed towards reducing debt or addressing temporary priorities such as infrastructure projects and urgent funding needs. Treasury pointed to the recent fuel levy relief measures as an example of this approach. The estimated R17.2 billion cost of the relief package was offset through higher-than-expected revenue collections and lower government spending, ensuring no additional pressure on public finances.

The new framework also places limits on compensation spending. Departments have been instructed to keep personnel costs within the boundaries set out in the 2026 Budget and manage staffing levels accordingly. Public institutions are expected to align salary adjustments with the government's broader wage bill management strategy.

National departments have also been warned against introducing policies that impose financial obligations on provinces and municipalities without identifying the necessary funding sources. Through these measures, National Treasury hopes to strengthen fiscal discipline, improve government efficiency and create greater room for investment in programmes that can support economic growth and better service delivery.