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UK Budget Deficit in Focus

UK Budget Deficit Soars Over March

Data out this morning shows that the UK budget deficit is continuing to widen as government spending soars. Public sector net borrowing rose to a £21.53bn deficit over March 2023, marking the second highest March borrowing since records began in 1993. Last month’s figure was also £16bn higher than last year’s March print as spending rose 16% to over £110bn. This rise in government spending comes as energy support measures (chiefly the Energy Bill Discount Scheme which reduces rather than caps energy costs for businesses), were estimated to cost the Treasury around £8bn over March.

When looking over the financial year ending in March 2023, UK government borrowing was slightly less than expected though tax revenues were lower than forecast. Over FY 2022-23, public sector net borrowing (excluding public sector banks) came in at £139.2bn – the equivalent of 5.5% of GDP – the fourth-highest level since records began in 1946. This came as tax revenues were £4bn lower than the OBR’s expectations, indicative of a weaker-than-expected economic environment.

With FY 2022-23 data now out, the UK’s sovereign debt is now over £2.5tn. This comes as the UK’s debt to GDP ratio has risen to 99.6% of GDP – levels not seen since the early 1960s.

Clashes over Ukraine Import Ban

Some of the EU’s constitutes including Poland, Hungary and Slovakia have become embroiled in a clash with Brussels as they attempt to ban a number of Ukrainian food exports. Governments in Warsaw, Budapest and Bratislava have reportedly come under pressures from farmers to ban food imports including grains, dairy products, sugar, fruit, vegetables and meats with protestors suggesting that surpluses from Ukraine have flooded the market and undercut their prices. Ukraine’s Ministry of Agriculture rebutted that “we understand that Polish farmers are in a difficult situation, but we emphasize that Ukrainian farmers are in the most difficult situation right now,”. Brussels have said that the unilateral moves are possibly illegal, maintain that “In such challenging times, it is crucial to coordinate and align all decisions within the EU”. With the EU rejecting Poland, Hungary and Slovakia’s ban, people will be paying close attention to see how the clash plays out.


With the country’s economy continuing to deteriorate, residents are forming long queues throughout Bolivia as they try to get their hands on greenbacks. Recently, the Bolivia has ceased to provide updates on their foreign exchange reserves as speculation mounts that the country’s USD reserves are drying up. This comes as the price on La Paz’ bonds have been caught in a downward spiral this year with bonds due in 2028 falling to below 46 cents on the dollar.

In February, Fitch downgraded Bolivia’s debt further to a B minus rating stating that there was a “heightened uncertainty around the authorities’ ability to manage this situation, as well as around its severity given an ongoing delay in publication of international reserves data”.

Bolivia’s economic woes have been compounded by the recent decline in wholesale natural gas prices, which has drastically reduced the government’s income. While, historically, Bolivia’s government have used natural gas receipts (denominated in USD) to fund fuel subsidies, the recent fall in natural gas prices have meant that the relief is increasingly unaffordable. This is particularly problematic given that the subsidy costs around 4% of GDP over 2022. Hence, as the fragile situation continues to get more precarious, Bolivia’s economic situation is gathering further attention.


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