Government spending surged by 24.6% year-on-year in March to R264.8 billion. This followed a 9.1% year-on-year increase to R194.5 billion in February. In January the rise was 11.2% year-on-year to R209.8 billion.
Consequently, the fiscal deficit soared to R45.6 billion in March 2026 from R11.2 billion in March 2025. Despite the March 2026 blowout, the fiscal deficit for the 2025/26 fiscal year narrowed to R330.9 billion from R334.9 billion in the previous fiscal year. The February 2026 Budget forecast had been for a R348.9 billion deficit.
The National Treasury statement said there was a 29.77% year-on-year surge in March in transfers and subsidies in direct charges. These include transfers to provinces as well as interest payments on government debt.
Fiscal year detail
Revenue for the fiscal year grew by 10.2%. This exceeded the February Budget estimate of a 9.3% increase.
Outlays for the fiscal year rose by 8.4%. This was only marginally below the Budget forecast of 8.5%.
Revenue breakdown
In most cases, actual revenue growth exceeded the Budget forecast.
Value-Added Tax collections grew by 9.8% compared with an 8.7% forecast increase. This may indicate that the economy grew faster than anticipated in the first quarter 2026. Statistics South Africa said the nominal value of the economy only grew by 4.6% in 2025.
Despite the surge in commodity prices in the first quarter 2026, corporate income tax collections rose by 8.4% compared with a forecast gain of 8.7%.
Similarly, the withholding tax on dividends disappointed. This category grew by 6.7% versus a projected 7.7%.
Outlays detail
The focus of fiscal policy has been to reduce government debt. This is because government debt increased from under 25% of the economy in 2008/09 to 77% in 2024/25.
Consequently, debt-service costs over the same period climbed from 9 cents of every rand of tax revenue to 21 cents. This meant that paying interest on debt took away from spending on public services and infrastructure.
That is why economists focus on how much government spends on servicing its debt. In the 2025/26 fiscal year, interest payments grew by 8.3% to R417.7 billion.
This growth rate exceeded the increase in transfers to provinces. This category grew by 8.1% to R649.3 billion. This was despite the government spending surge of 24.6% year-on-year in March.
