South Africa will rely more heavily on its domestic bond market to refinance a maturing debt load, its Treasury said in the medium-term budget policy statement on Wednesday.

Although domestic borrowing is expected to decline slightly to 256.5 billion rand ($14.8 billion)in the 2026/27 fiscal year, it will rise to 412 billion rand the following year. It will then drop, but remain at elevated levels, the statement shows.

This will coincide with the redemption of bonds which are maturing and require repayment averaging approximately 208 billion rand annually in the coming years.

To meet these obligations, the Treasury plans fresh debt issuance, to adjust repayment schedules or implement deeper spending cuts, the statement showed.

The Treasury said it will continue with "bond switches", allowing investors to exchange bonds nearing maturity for longer-term instruments. While this mitigates short-term repayment pressure, it does not reduce overall debt levels.

Investors have been forecasting reduced weekly bond auction sizes. The Treasury previously signalled cuts would only occur if lower issuance proves sustainable rather than temporary.

In terms of external borrowing, South Africa raised $2.6 billion of the projected $5.3 billion for 2025/26 from multilateral development banks. It will raise the balance of $2.7 billion in global markets.

Additionally, the Treasury plans to leverage South Africa's gold and foreign exchange account to ease future borrowing. The buffer stood at 364 billion rand by March 31, well above the target of 260 billion rand.

After allocating 50 billion rand from the account earmarked for the current fiscal year, funds totalling 31 billion rand will be utilized in 2026/27 to curb borrowing requirements.

Meanwhile, 23 billion rand will remain with the Reserve Bank as a financial buffer. ($1 = 17.3125 rand)

(Reporting by Colleen Goko, editing by Karin Strohecker and Alexander Smith)