Ireland's budget deficit fell sharply in March compared to a year ago, after last week's deal on the €3.1 billion cash payment was deferred.

According to Exchequer figures for March from the Department of Finance, the Government's deficit last month was €4.26bn compared to €7.07bn last year.

The budget deficit fell sharply last month after the Government deferred paying promissory notes to do with bailing out the banks and settled the payment this year by issuing a 13-year bond instead.

In the first three months of this year, the Government took in €8.7bn in tax, that is just over 16% more than in the same three months of 2011, and 10% ahead of target for the year to date.

Some of this increase can be put down to a late processing of Corporation Tax, which was due in December, but received in January.

The income tax receipts were almost 10% ahead of targets, but this was because of a reclassification of receipts from employers that were previously returned as PRSI. If this had not happened income tax receipts would have been 3.5% ahead of targets.

Government spending was 2.5% ahead of targets, and Finance Minister Michael Noonan said he will be stressing to his Cabinet colleagues the importance of adhering to the 2012 spending targets "as we did in 2011".

Mr Noonan said the higher spending was mainly in the areas of Health and Social Protection.

He said he was confident that spending would be "actively managed and within agreed limits".

The minister also said that the figures show the Government is on target to reduce its general deficit to 8.6% of GDP this year.