The US budget deficit has grown to almost $2 trillion over the past year, reaching its highest level since 2021.
The expansion comes amid growing worries about the massive $40.3 trillion US debt load, rising inflation, and climbing borrowing costs.
Refunds of the Trump administration's tariffs, after they were overturned, have further widened the budget gap.
The federal deficit, which occurs when government spending exceeds its revenues, rose to $1.99 trillion in fiscal year 2026, the Treasury Department said.
This marked a 12-percent increase from the prior year, when the shortfall came in at $1.78 trillion.
A key driver of expenditures was the rising interest paid on public debt, which jumped $144 billion to a record $1.36 trillion.
Interest costs on around $32 trillion in publicly held US debt have been ballooning in recent years, and climbing bond yields have sparked further concerns.
Treasury bond yields, which influence interest rates for mortgages and auto loans, have jumped this year, with steeper borrowing costs adding to pressures that US voters face ahead of November's midterm elections.
Treasury data released Friday showed $145 billion in customs refunds over the year, primarily from tariffs, erasing significant gains from Trump's duties.
Overall, government revenues climbed by three percent to $5.40 trillion in the latest fiscal year, which ended September 30.
But spending was much higher, rising by six percent to $7.40 trillion.
War risks
The Trump administration has pledged to cut deficits and government spending since it returned to the White House last year.
Besides slashing the federal workforce and foreign aid, the Republican-controlled Congress pushed through cuts to the Medicaid health insurance scheme and moved to shrink the federal food assistance program too.
But they also extended expiring tax cuts and provided fresh funding for administration’s migrant deportation drive.
The latest data released on Friday showed that higher tax collections from individuals and customs revenues were offset by more refunds and lower corporate tax collections.
Among other sectors, spending on defence military programs increased by $48 billion, or six percent, over the year to $917 billion.
Taken together, a Treasury official estimates the US deficit-to-GDP ratio is around 6.2 percent, up from 5.8 percent last year.
This stands in contrast to Treasury Secretary Scott Bessent's previously stated goal of bringing the deficit down to three percent of GDP, alongside other targets like spurring economic growth of three percent.
The latest budget figures come less than three weeks before US midterm elections, where US President Trump's Republican party is fighting to retain control of Congress.
Ahead of the crucial vote, both Republicans and Democrats have raised ideas that could widen the budget shortfall further.
Democrats say they are looking to reverse Medicaid cuts and revive health care tax breaks.
