UK Budget Deficit Exceeds Official Estimate

The UK budget deficit exceeded the official estimate in May as higher inflation pushed up interest payments on government debt, the Office for National Statistics said Thursday.

Public sector net borrowing, excluding public sector banks, declined GBP 4.0 billion from the previous year to GBP 14.0 billion in May. Economists had forecast the deficit to fall to GBP 12 billion.

Nonetheless, this was the third-biggest May borrowing since records began in 1993 and GBP 3.7 billion more than the Office for Budget Responsibility forecast.

Interest payment rose to GBP 7.6 billion in May, reflecting higher inflation as the interest paid on index-linked gilts rises with increases in the retail prices index.

On an accrued basis, this month saw the third highest debt interest payment made by central government in any single month and the highest payment made in any May on record, the ONS said.

The OBR estimated that debt interest payments will cost central government GBP 87.2 billion over the financial year ending March 2023.

In May, central government receipts grew 9.4 percent annually, while expenditure dropped 2.9 percent.

In the financial year to May, PSNB totaled GBP 35.9 billion, which was GBP 6.4 billion less than in the same period last year.

At the end of May, public sector net debt excluding public sector banks was GBP 2,363.2 billion, or around 95.8 percent of gross domestic product, an increase of GBP 170.1 billion or 0.5 percentage points of GDP compared with May 2021.

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