Public sector net borrowing requirement (PSNBR)reached £17.9 billion in May, according to the Office for National Statistics (ONS).
This was higher than for the same month last year when it reached £15.2 billion.
The double-dip recession is being blamed for a reduction in tax receipts that has widened the deficit. Income tax receipts fell by 7.3 per cent in May 2012.
Current expenditure increased by 7.9 per cent in May, suggesting that the government is having difficulty in imposing its spending cuts.
Public sector net debt has now reached £1013.4 billion, 65 per cent of GDP. This compares with total public debt of £921.3 billion by the end of May 2011, equivalent to 61.3 per cent of GDP.
Last month the public finances were helped by a windfall from the Royal Mail pension fund which resulted in a record surplus of £16.5 billion.
However, this one-off boost hides the continuing increase in the public finances, contrary to the stated aims of the Chancellor, George Osborne who has put cutting the deficit close to the top of his economic priorities.
Public sector net debt has fallen slightly in the last 12 months. This has now reached £2246.3 billion, 144.2 per cent of GDP, down from £2247.3 billion, equivalent to 149.4 per cent of GDP.
Howard Archer, Chief UK & European Economist at IHS Global Insight said: “Only two months into the fiscal year, it is evident that Mr. Osborne is facing a major battle to meet his fiscal targets for 2012/13 and is in grave danger of losing it.
“ The PSNBR amounted to £28.4 billion in the first two months of 2012/13, which was up from £24.5 billion in the first two months of 2011/12. If this trend was to be continued over the rest of the fiscal year, the PSNBR would come in around £148 billion, which would be £28 billion above the targeted £120 billion.”
Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.
Twitter: My Finances
Join the conversation at #news_myfinances