British public sector borrowing was higher than expected in April, underscoring the challenge facing Prime Minister Rishi Sunak and finance minister Jeremy Hunt who have said they want to cut taxes further as they face an election this year.

Net borrowing excluding state-controlled banks was 20.5 billion pounds ($26.05 billion) last month, the Office for National Statistics said on Wednesday.

April's borrowing, the first of the 2024/25 financial year, was higher than the median forecast of 19.3 billion pounds in a Reuters poll of economists.

The ONS slighted raised its estimate for the budget deficit in the last 2023/24 financial year to 121.4 billion pounds from its initial estimate of 120.7 billion pounds published last month - equivalent to 4.5% of economic output, against 4.4% previously.

The full-year outcome was 7.3 billion pounds more than expected by the Office for Budget Responsibility, whose forecasts under the government's fiscal plans. The OBR expects the deficit by the end of the current 2024/25 year to have narrowed to 87.2 billion pounds, or 3.1% of GDP.

The OBR had also expected smaller borrowing of 19.3 billion-pounds in the month of April.

The figures underscored the limited room for Sunak and Hunt for any pre-election sweeteners ahead of a national election, due by January 2025 at the latest.

Hunt's latest budget published in March met the government's fiscal targets by a only slim margin of 8.9 billion pounds.

Announcements since then - including a commitment to ramp up defence spending to 2.5% of GDP, and a multi-billion pound compensation programme for some victims of a contaminated blood scandal - have already eroded that margin.

The International Monetary Fund warned Britain's government on Tuesday that it was on course to miss its debt target and should not cut taxes before an election later this year, with tax rises likely to be needed in future.

The ONS said public sector net debt excluding public sector banks at the end of April 2024 stood at 97.9% of gross domestic product, up 2.5 percentage points from a year earlier and at levels last seen in the early 1960s.

Public sector revenues in April grew by 1.6 billion pounds from a year earlier but were outstripped by a 3.1 billion-pound increase in spending. ($1 = 0.7869 pounds) (Reporting by William Schomberg; Editing by Suban Abdulla)