The U.K. public deficit widened in June raising concern about the ability of the government to bring down its shortfall to the target as the economy is struggling to avoid sinking deeper into a double-dip recession.
Public sector net borrowing (PSNB) excluding the temporary effects of financial interventions rose to GBP 14.45 billion from GBP 13.92 billion during the same month last year, the Office for National Statistics reported Friday.
If the trend continue over the rest of the fiscal year, the PSNB would come in around GBP 140 billion, which would be GBP 20 billion above the targeted GBP 120 billion, IHS Global Insight's economist Howard Archer said.
The deficit exceeded the GBP 13.4 billion consensus, but down from GBP 18.42 billion in May as revenues rose 3.6 percent, while spending declined 0.8 percent from April.
Borrowing totaled GBP 125.7 billion for 2011/12, which was GBP 0.3 billion lower than the Office for Budget Responsibility's forecast of GBP 126 billion.
At the end of June 2012, the public sector net debt excluding the temporary effects of financial interventions was GBP 1,038.3 billion, which was equivalent to 66.1 percent of GDP.
Excluding interventions, the deficit was GBP 42.9 billion during the first three months of the fiscal, compared to GBP 38.4 billion a year ago.
In April, there were two one-off transactions. The first was a GBP 28 billion capital grant to the government from the transfer of the Royal Mail Pension Plan. It also received a GBP 2.3 billion capital grant from the closure of the Bank of England's Special Liquidity Scheme for banks.
The Office for Budget Responsibility last week said the U.K. fiscal position is unsustainable if the government absorbs national income simply to pay the interest on its debt.
However, the International Monetary Fund on Thursday urged the U.K. government not to accelerate its fiscal consolidation if growth fails to gather momentum despite further monetary and credit easing. The lender forecast the economy to expand 0.2 percent in 2012 and 1.4 percent in 2013.
by RTT Staff Writer
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