South Africa’s latest budget painted an encouraging picture of improving public finances, according to Moody’s Ratings, while cautioning that “meaningful” debt reduction will require stronger economic growth.

The budget “confirms South Africa’s strong fiscal performance, underpinned by broad-based revenue growth, and points to improving fiscal prospects,” said Evan Wohlmann, Vice President-Senior Credit Officer at Moody’s.

Finance Minister Enoch Godongwana’s annual budget presentation on Wednesday showed debt and debt-service costs peaking this year and then declining, helped by surging precious-metals prices that have boosted government revenue. The rand and government bonds rallied.

In his speech to lawmakers in Cape Town, the minister said the world had taken note, citing S&P Global Ratings’ decision in November to grant South Africa its first upgrade in two decades.

That lifted S&P’s assessment to BB from BB-minus and also put it on a positive outlook, which South African officials said was as good as two ratings upgrades.

The move raised hope that the country is on track to restore the investment-grade rating it lost as public finances deteriorated under former President Jacob Zuma, whose tenure in office was marred by corruption scandals, mismanagement and soaring debt levels. Moody’s rates South Africa Ba2 — two notches below investment grade.

National Treasury Director-General Duncan Pieterse said his team was actively engaging credit-rating companies to encourage them to recognise the country’s progress.

“We have taken a much more proactive approach, interrogating the modelling of some of the ratings agencies, questioning some of those assumptions and making our case of fiscal credibility,” he told reporters in Cape Town. “Over time, hopefully, that will assist in the potential for ratings upgrades.”

Moody’s cut South Africa to junk in 2020, after similar moves by S&P and Fitch several years before. While it’s upbeat about the outlook after the budget, it stressed the need for stronger economic growth.

“South Africa’s fiscal space to absorb shocks will remain limited,” Wohlmann said. “We expect general government debt will remain above 80% of gross domestic product in the coming years and meaningful debt reduction likely hinges on growth exceeding our baseline.”

Others agreed that the ratings companies will want to see tangible results before upgrading their assessments.

“We expect that if GDP growth improves in first half 2026, a positive outlook from Fitch and Moody’s might emerge toward the year-end,” said Citigroup Inc.’s South Africa economist, Gina Schoeman.