New Zealand's budget deficit for eight months to February widened more than expected as recession continued to impact government's finances, the Financial Statements from the Treasury showed Friday.

The operating deficit was NZ$8.4 billion for eight months to February compared to the NZ$3.2 billion surplus forecast in the Pre-Election Update. In the December Update, the Treasury estimated a deficit of NZ$3.2 billion.

The deficit was largely driven by NZ$3.5 billion losses on financial instruments compared to the NZ$2.2 billion reported in the January results.

Tax revenue and receipts were approximately NZ$1.8 billion lower than forecast in the Pre Election Update. This variance had increased since last month, mainly due to a temporary timing difference that is expected to reverse next month.

The operating balance before gains and losses or OBEGAL was NZ$0.1 billion, which was NZ$1.8 billion lower than forecast in the Pre-Election Update.

The government's cash deficit totaled NZ$6.61 billion, which was NZ$1.7 billion larger than forecast.

Finance Minister Bill English said, It's clear that the global recession continues to have an impact on the government's finances. It's also clear that the patently loose spending policies of the previous Labour-led government were unsustainable.

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