Ottawa's budget deficit reached $7.2 billion at the end of June , the end of the government's fiscal first quarter, the federal Finance Department reported Friday.

The shortfall between spending and revenue narrowed from $12.5 billion for the same period in 2009.

The federal government says it's on track toward a budgeted $49.2B deficit, but 'considerable uncertainty' remains.

The government said its target for the annual deficit hasn't changed from the budget forecast of $49.2 billion.

That could change, though, given that "there remains considerable uncertainty with respect to the strength of the global economic recovery," it said on its website.

"Overall, three months of fiscal information is not sufficient to draw any firm conclusions about the outlook for the year as a whole."

First quarter revenues rose $1.9 billion, or 3.7 per cent, and program spending fell by $3.2 billion, or 5.5 per cent, compared with the same period a year earlier

Almost half of the deficit in the first quarter — $3 billion — resulted from reduced taxes, increased benefit payouts to the unemployed, and stimulus spending on infrastructure.

June deficit $2.8B

In the month of June alone, the deficit was $2.8 billion, down from $5 billion in the same month in 2009.

Revenue during the month fell by $500 million, or 2.5 per cent, which was less than expected as higher goods and services tax revenues helped to offset lower personal and corporate income tax collections.

Some consumers are believed to have moved up intended purchases, especially of big-ticket items such as houses, ahead of the imposition in July of harmonized sales taxes in Ontario and British Columbia.

Government program spending in June fell to $2.7 billion, or 12.9 per cent, as Ottawa transferred less to provinces, territories and individuals compared with the year earlier.