Budget 2026: Finding balance - optimism and realism

With a year before the Government predicts its first operating surplus in over a decade, the budget’s key question remains: ‘can it succeed?’

The answer is unclear. While parts of the budget reflect realism, aspects like strong revenue growth projections seem optimistic.

Projected economic growth is strong at 4% in 2026, slightly down from 4.5% in 2025. Such growth would be enviable among advanced economies, but translating this into government revenue and achieving a surplus depends on various factors that drive government income.

Revenue growth is expected to jump 15.3% in 2026, surpassing both GDP and expenditure growth - the latter projected at 9%. The anticipated K5.4 billion revenue hinges on realising higher taxes and dividends from resource extraction, incomes, profits, and capital gains. This is a bold projection in a period of elevated global uncertainty. Conversely GST collections are expected to fall, possibly due to extending exemptions for essential goods until the end of 2026.

Expenditure growth focuses on enhancing essential services, including security, education, health, and agriculture.

The wild card is the proposal for a new path to debt repayment, offering the option of lower future surpluses in return for almost triple the funding for the Provincial Investment Plan. This would result in debt to GDP of 20 per cent by 2034, up from the planned 0 per cent.

Whether this option can be achieved all comes down to finding the balance between achieving the Government’s development goals and sustainably funding them.