Godongwana said this also enabled the government to prioritise investment over debt service, which now consumes 22 cents of every rand of revenue and is significantly higher than in peer countries, driving up borrowing costs for households and businesses.

"The Budget remains committed to a balanced fiscal strategy. As projected in the 2024 MTBPS, a budget primary surplus of 0.5% of GDP will be achieved in 2024/25, and this will grow to 0.9% in 2025/26," Godongwana said.

"Government debt will stabilise, at 76.2% of GDP in 2025/26, while the consolidated budget deficit also narrows, to 3.5% by 2027/28. As debt stabilises, a growing primary surplus will enable the government to reduce debt-service costs as a proportion of revenue."

Godongwana said some of those savings will be used to build up fiscal buffers that we need as protection against future economic shocks. He said shocks like the COVID-19 pandemic, and other uncertainties stemming from the rising geopolitical tensions and the global economic ramifications thereof.

"Debt-service costs will amount to R389.6bn in the current financial year. This translates to 22 cents of every rand we raise in revenue. It is more than what we spend on health, the police and basic education.

"We must reverse this trend and prevent the cost of debt from taking away resources that could otherwise be spent on our pressing social needs, or to invest in growth. In this regard, our fiscal strategy stabilises debt service costs as a percentage of revenue in 2024/25 by maintaining a primary budget surplus."

Godongwana proposed a significant increase in revenue, including raising the value-added tax (VAT) rate by 0.5 percentage points in each of the next two years, bringing VAT to 16% in 2026/27, in response to new and persistent spending pressures.

The 2025 Budget funds spending pressures of R232.6bn over the Medium-Term Expenditure Framework period, including provisional allocations for frontline service delivery departments amounting to R70.7bn.

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Budget 2025: Godongwana warns of possible reductions amidst deteriorating fiscus