The IMF has suggested SA adopt a 60% debt cap to curb its fiscal free-for-all, while also hinting that a lower inflation target might also be advisable. The International Monetary Fund (IMF) has recommended that South Africa adopt a long-term fiscal rule and cap its overall debt ratio at 60% of gross domestic product (GDP); and voiced its support for a lowering of the central banks inflation target.The IMF recommended earlier this year that South Africa craft a fiscal rule to impose a debt ceiling or anchor. But this is the first time it has suggested a 60% debt-to-GDP ratio to target. The suggestion comes as South Africa grapples to contain its swelling debt levels and reboot its ailing economy under the Government of National Unity (GNU).A fiscal rule anchored in a prudent debt ceiling can help underpin the consolidation and support policy credibility, the Washington-based lender said in a statement issued after one of its regular staff mission visits to South Africa. The mission recommends an enhanced fiscal framework including a long-term prudent debt anchor (of around 60% of GDP, in line with that of peers), a credible fiscal rule (building on the existing expenditure ceiling), and an independent body to assess compliance.The 60% of GDP recommendation is a very long-term goal. The Treasurys current forecast is for debt to reach 74.7% of GDP in 2024/25 and around 75% of GDP by 2027/28, when the aim is to stabilise it at these levels.The National Treasury said this will enable the government to arrest the trend of mounting debt-service costs, which will peak as a proportion of revenue at 21.7% in 2025/26 and decline thereafter. Although there are significant external and domestic risks to the fiscal strategy, the government is determined to maintain a prudent, disciplined approach to ensure sustainable public finances, the Treasury noted in a statement issued today in response to the IMF recommendations.The mission recommends a consolidation effort of 1% of GDP per year over the next three years to achieve a primary surplus sufficient to lower debt to around 60`70% in the next five to 10 years, the IMF said.This could be achieved by cutting inefficient public spending on subsidies, curtailing transfers to SOEs, improving procurement processes (by judiciously implementing the new procurement bill), and rationalising the public-sector wage bill (by limiting wage increases to below-inflation adjustments and incentivising early retirement, as planned), while protecting vulnerable groups.Having a long-term cap on debt would certainly go a long way towards boosting South Africas fiscal credibility at a time when it is desperately trying to claw its way out of junk status with the ratings agencies. S&P Global has revised South Africas outlook to positive from stable, which signals that an upgrade may finally be on the horizon on this front.Getting on a path to faster economic growth will help to make a debt target doable. Faster growth rates translate into a bigger revenue stream for the Treasury, reducing the need for borrowing. At the same time, more elevated levels of GDP mean that debt as a percentage measured against it falls The IMF also said that a lower inflation target would support medium-term macroeconomic stability.South Africas current annual inflation rate is 2.8%, which is below the South African Reserve Banks (SARB) 3-6% target range. With inflation slowing and not seen exceeding 4% before the middle of 2025, the SARB has cut interest rates twice by 25 basis points since September.But Governor Lesetja Kganyago has made the case recently for lowering the inflation target to 3%, and talks are currently under way with the Treasury about this issue.Shifting from the current target band to a lower point target at an appropriate time could help lower expectations and inflation, the IMF said.