April 10 (Reuters) - The U.S. federal budget deficit

shrank in March from a year earlier as outlays dropped and

receipts rose with the annual tax-filing season well underway,

the U.S. Treasury Department said on Wednesday.

The deficit last month was $236 billion, down 38% from the

$378 billion shortfall in March 2023. Outlays fell 18% to $569

billion, in part because this year there were no large bank

failures requiring government aid, Treasury officials said. The

decline in March outlays compared to the prior year was also

driven by a drop from last year's Department of Education

expenses. Receipts rose 6% to $332 billion.

Economists polled by Reuters had expected a deficit of

$197.5 billion in March.

For the first six months of the fiscal year, the deficit

shrank by $36 billion, or 3%, to $1.065 billion. Receipts were

up 7% to $2.188 trillion, a record according to Treasury

officials, and outlays rose 3% to $3.253 trillion.

Interest costs on the national debt continue to be a big

driver of government outlays, rising 36% year to date to $522

billion, second only to Social Security in individual line item

expenses. For March alone debt-servicing costs were $89 billion,

up 14% from a year earlier.

The weighted-average interest rate on Treasury securities

during the month rose to 3.22%, 65 basis points higher than last

year.

Individual tax refunds, which are deducted from

receipts, were $11 billion lower, down 16% from 12 months

earlier. Individual withheld receipts in March were up $8

billion, or 2%, from a year earlier.