Chancellor George Osborne's deficit-busting plans were back on track after official figures revealed a slight reduction in the amount of money borrowed by the Government in May.
Public sector net borrowing, excluding financial intervention such as bank bailouts, was £17.4bn, compared to £18.5bn in the same month last year.
The Chancellor was dealt a blow last month when public borrowing for April came in far higher than expectations - in the first month Government spending cuts should have started to kick in.
The May figure - in line with City expectations - brings total public borrowing for the financial year to date to £27.4bn.
Tax and spending watchdog the Office for Budget Responsibility has forecast total public borrowing for the year to March 2012 of £122bn, which has been adopted as a target by the Government.
The coalition borrowed £143.2bn in the last financial year, slightly less than the £146bn forecast by the OBR.
Public borrowing decreased last month after an 8.2% year-on-year increase in tax receipts to £38bn overshadowed a 2.2% increase in Government spending to £51.7bn.
Within tax receipts was a 16.7% increase in VAT takings, compared to May 2010, reflecting the VAT increase from 17.5% to 20% introduced in January.
But, within expenditure, the figures showed the Government is struggling to keep a lid on soaring interest payments, which saw the largest year-on-year spending increase of 8.9% to £4.4bn.
The Chancellor received a boost earlier this month after the International Monetary Fund endorsed his deficit-reduction plans, adding that they "remained essential".
But economists have warned the impact of the cuts may damage the faltering economic recovery, which in turn would reduce the Government's tax income.