National Treasury’s big plan

South Africa’s National Treasury is considering raising additional borrowing in its latest budget rendition, to be delivered on Wednesday, to cover a revenue shortfall after a plan to increase taxes was scrapped.

Increased borrowing, although unpalatable, isn’t being ruled out, said people familiar with the budget process, who asked not to be identified because they aren’t authorised to comment. If it is raised, they stressed, it would be by a conservative amount.

Treasury officials, who have entered their pre-budget quiet period and are not available for comment, have been reluctant to increase borrowing as debt-service costs, including interest payments on government debt, consume more than a fifth of South Africa’s budget revenue.

South Africa’s Finance Minister Enoch Godongwana will deliver his third version of the budget to lawmakers at around 2 p.m. in Cape Town.

Two previous versions were shelved because of disagreements within the governing coalition between the African National Congress and the Democratic Alliance over plans to increase the value-added tax rate.

That left Treasury with a R75 billion funding gap over the next three years, including a 13 billion rand hole in the 2025-26 budget, with few options to fill the shortfall.

Improved revenue collection and spending cuts might have done the trick. However, since the Treasury proposed a VAT hike in February, South Africa’s economic outlook has worsened amid US President Donald Trump’s sweeping tariffs and doubts over the coalition government’s stability.

The International Monetary Fund has revised its 2025 growth forecast 0.5 percentage points lower to 1% for South Africa and the Treasury, which previously saw the economy expanding 1.9%, is also likely to cut its projection when Godongwana presents the budget to Parliament.