The British government posted a bigger than expected surplus in January, though analysts say it wasn't enough to allow an easing of planned spending cuts.
The Office for National Statistics said that tax revenues exceeded spending by £7.8 billion. That was the biggest monthly surplus in four years and better than the market consensus of a £6.3 billion pounds surplus.
With two months to go in the financial year, analysts said Britain is on track to hold full-year borrowing below the £127 billion forecast by the independent Office for Budget Responsibility.
They expect Treasury chief George Osborne to continue with his deficit-reduction program, especially in view of recent weakness in the economy - GDP shrank by 0.2 percent in the fourth quarter - and the decision by Moody's Investors Service to put the nation's AAA credit rating on negative watch.
"The government has so far heralded Moody's decision as confirmation of the importance of sticking to 'Plan A' and there are few signs that its will to implement 'Plan A' has weakened in the face of economic stagnation," said Blerina Uruci at Barclays Capital Research.
The expected undershoot of the full-year forecast is "a small victory in a long and drawn-out battle to keep the debt burden manageable," Uruci said.
Chris Williamson, chief economist at financial data company Markit, said January's good result gives Osborne leeway for some modest stimulus measures in the 2012 budget on March 21. Williamson speculated that any such measures "would most likely take the form of tax incentives rather than reversals of previously announced spending cuts".
While the government hacks away at spending, the Bank of England has sought to stimulate the economy with massive cash injections. It has committed £325 billion to the controversial program including £50 billion approved earlier this month. The policy, known as quantitative easing, involves creating money electronically and using it to purchase government bonds and other high-grade assets.
The minutes of the Monetary Policy Committee's February meeting, to be released on Wednesday, will be closely scrutinised for indications of whether the Bank is likely to raise the total further.
Analysts at Investec Securities said they believe the nine members of the committee all voted for February's injection.
"A unanimous vote may well raise expectations that a further slug of QE will be forthcoming at some point," they said in a research note.
AP