Finance Minister Enoch Godongwana is expected to reaffirm South Africa’s commitment to fiscal consolidation when he delivers the Medium Term Budget Policy Statement (MTBPS) in Parliament on Wednesday, 21 October at 14:00.
The mid-term budget will provide an update on the government’s financial position, including revenue collection and spending in the current 2026/27 financial year, while outlining the National Treasury’s policy direction over the next three years.
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Economists say stronger-than-expected tax collections have given the government some breathing room.
However, pressure from rising fuel prices, higher inflation and interest rates has renewed questions about whether the state should offer further relief to households.
Higher tax revenues offer Treasury some room
National Treasury has reportedly benefited from stronger revenue collection over the past six months, with personal income tax, value-added tax (VAT) and corporate income tax among the contributors.
Buoyant commodity prices have helped support company tax revenues, giving government departments a better fiscal position than might otherwise have been expected.
However, economists are urging Treasury to avoid spending all the additional revenue, arguing that it could help stabilise public finances, reduce the budget deficit and improve South Africa’s credit rating outlook.
Fiscal anchor and debt stabilisation in focus
Godongwana is also expected to maintain the government’s focus on fiscal consolidation, including efforts to stabilise public debt.
There is speculation that Treasury could announce a formal fiscal anchor to strengthen its commitment to managing the country’s finances.
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Rising fuel prices are another issue likely to feature in discussions around the state of the economy.
Higher fuel costs can feed through to transport, food and other essential goods, adding to the pressure on households already dealing with a higher cost of living.
This has prompted speculation about whether Treasury could again reduce the fuel levy to cushion consumers, following temporary relief introduced earlier in 2026.
The challenge for government is to balance short-term cost-of-living pressures against the need to put public finances on a more sustainable footing.
COSATU criticises spending cuts and wage restraint
The government’s fiscal approach has also drawn criticism from organised labour.
At its 15th National Congress, the Congress of South African Trade Unions (COSATU) criticised what it described as the government’s continued neoliberal policies, arguing that spending cuts and wage restraint have weakened the state’s ability to tackle unemployment, poverty and inequality.
COSATU Deputy General Secretary Gerald Twala said these measures were political choices rather than unavoidable economic decisions.
The federation’s position highlights the tension facing Treasury: efforts to contain expenditure and stabilise debt must be weighed against demands for stronger public investment and better services.
Calls for a wealth tax continue
Tax policy is another area where civil society groups want greater engagement, although the MTBPS does not generally focus on detailed changes to individual taxes.
Some organisations continue to advocate for a wealth tax, arguing that the tax burden should be shifted away from working-class households facing mounting living costs.
What the MTBPS could mean for South Africa
Economists believe continued fiscal consolidation could improve investor confidence and strengthen the case for future credit rating upgrades.
A lower budget deficit, stabilising debt levels and improved borrowing conditions could eventually reduce the cost of capital for investment and development, supporting economic growth.
However, the decisions outlined by Godongwana will also be judged against the immediate pressures facing households, including higher fuel prices, inflation and the cost of living.
The MTBPS is therefore expected to test how Treasury balances fiscal discipline with calls for greater support for consumers, workers and public services.