Pound hits nine-month low as UK borrowing costs soar

The pound has dropped to its lowest level in nine months, following a rise in UK government borrowing costs.

The drop came as UK 10-year borrowing costs surged to their highest level since the 2008 financial crisis when bank borrowing almost ground to a halt, News.Az reports, citing BBC.

Economists have warned the rising costs could lead to further tax rises or cuts to spending plans as the government tries to meet its self-imposed borrowing target.

According to several media reports, a spokesperson for the Treasury said: "No one should be under any doubt that meeting the fiscal rules is non-negotiable and the government will have an iron grip on the public finances."

Earlier, the government said it would not say anything ahead of the official borrowing forecast from its independent forecaster due in March.

"I'm obviously not going to get ahead... it's up to the OBR (Office for Budget Responsibility) to make their forecasts."

"Having stability in the public finances is precursor to having economic stability and economic growth," the Prime Minister's official spokesman said.

Shadow chancellor Mel Stride claimed that the Chancellor's significant spending and borrowing plans from the Budget are "making it more expensive for the government to borrow".

"We should be building a more resilient economy, not raising taxes to pay for fiscal incompetence," he said in a post on X.

The warning comes after the cost of borrowing over 30 years hit its highest level for 27 years on Tuesday.

Meanwhile the pound dropped by as much as 1.1% to $1.233 against the dollar, marking its lowest level since April last year.

The government generally spends more than it raises in tax. To fill this gap it borrows money, but that has to be paid back - with interest.

One of the ways it can borrow money is by selling financial products called bonds.

News.Az