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U.S. Red Ink Halved

FILE: A statue of former Treasury Secretary Albert Gallatin stands guard outside the Treasury Building in Washington. Taken August 8, 2011

The US budget deficit fell by half in the past year to $1.38 trillion on the back of a pandemic recovery and as relief spending eased, the government said Friday.

The drop in the U.S. budget deficit marks the "largest one-year decrease," the Treasury Department and White House budget office announced on Friday.

"Today's joint budget statement provides further evidence of our historic economic recovery," said Treasury Secretary Janet Yellen in a statement, citing the American Rescue Plan stimulus package.

Covid-related spending such as unemployment insurance and other programs have declined following a recovery in the world's biggest economy from the virus outbreak, with businesses returning to normal.

This was helped by higher individual and corporation tax receipts, bolstered by employment growth, with tax revenues for the fiscal year ended September 30 surging a record $850 billion from 2021.

The figures for the fiscal year ended September 30 showed government outlays dipped $550 billion to $6.27 trillion.

Federal borrowing rose by $2 trillion to $24.3 trillion, still close to the size of the world's biggest economy, data showed.

With soaring inflation bringing a sharp rise in borrowing costs, interest on the public debt came in at $36.6 billion higher than estimated, the Treasury Department said.

The deficit news comes weeks before U.S. voters go to the polls to pick Members of Congress, along with state and local officials.