JOHANNESBURG - South Africa remains on track to meet its fiscal targets despite the conflict in ​the Middle East, its ⁠National Treasury said on Tuesday, adding it wanted to demonstrate ‌its credibility by meeting its objectives even at times of stress.

Below are reasons why ​Treasury Director-General Duncan Pieterse thinks the Iran war will not derail South Africa's fiscal ​trajectory. He ​was speaking at a Citi emerging markets conference.

Recent fiscal outcomes have beaten forecasts: South Africa achieved a third consecutive primary ⁠surplus for the fiscal year to end-March, of 1.1% of gross domestic product (GDP) against a budget estimate of 0.9%.

Relief measures rolled out in response to the Iran war are designed to be fiscally-neutral: Fuel levy ​relief from ‌April to June ⁠will cost 17.2 ⁠billion rand ($1.06 billion), but this will be funded by the fiscal outperformance from ​the previous year.

There are near-term buffers: ‌before the war economic growth was improving, the ⁠current account was balanced, the rand was on a solid footing and bond yields were compressed.

Expenditure is largely insulated from higher inflation: the public sector wage bill accounts for almost one-third of spending over the medium term, but there is a wage deal in place until the 2027/28 fiscal year.

Debt dynamics have structurally improved: debt is expected to have peaked in 2025/26 and to decrease ‌to 76.5% of GDP by 2028/29.

The finances of ⁠state-owned companies are turning around, reducing the risk ​of further calls for fiscal support. One of the biggest drains has been power utility Eskom, but it is on course for its second consecutive ​full-year profit. ‌Eskom last implemented electricity blackouts over a year ago.

 

($1 = ⁠16.1892 rand)