Public sector net borrowing was £300 million lower than a year earlier, narrowly undershooting recently revised official forecasts for £120.9 billion, the figures from the Office for National Statistics (ONS) showed. That is worse than City hopes for a £117 billion deficit in the financial year.
Britain's finances remain under intense pressure after figures showed annual net borrowing managed only a slight dip to £120.6 billion in the financial year to the end of March.
Delayed or slashed government departmental spending helped drive net borrowing excluding financial interventions such as bank bailouts £1.6 billion lower to £15.1 billion in March, the ONS added.
The independent Office for Budget Responsibility's (OBR) forecast for public sector debt of £120.9 billion in the 2012-13 year strips out boosts from the transfer of Royal Mail pension assets to the public purse, plus cash transfers from the Government's quantitative easing programme.
Once these were factored in, public sector debt fell £34.7 billion to £86.2 billion for 2012-13, down from £120.9 billion a year earlier. The OBR sees the underlying deficit remaining stubbornly high at £120 billion in the year to the end of March 2014.
Total public sector net debt was a record £1.186 trillion in March, equating to 75.4% of GDP. Slow progress in cutting the deficit will pile further pressure on the Government, after ratings agency Fitch stripped the UK of its AAA debt rating on its weak outlook and high debt. Net debt as a percentage of GDP was up from £1.1 trillion or 71.8% a year earlier.
Chancellor George Osborne will be hoping official GDP figures on Thursday show the UK economy grew in the first quarter of the year, narrowly avoiding a triple-dip recession.
The International Monetary Fund has ratcheted up pressure on the Government to reconsider its austerity drive as Britain struggles to grow.
A Treasury spokeswoman said: "Though it is taking time, the Government is fixing this country's economic problems. The deficit is down by a third, a million and a quarter new private sector jobs have been created and interest rates are at near-record lows, benefiting households and businesses."
Labour Treasury spokesman Chris Leslie said: "Underlying borrowing was essentially the same last year as the year before and the OBR forecasts it will be around the same this year. And the lack of economic growth means the Government is now set to borrow £245 billion more than planned simply to pay for the costs of their economic failure. George Osborne no longer has a deficit reduction plan. In fact, at this rate, it will take 400 years to balance the books."