The deficit in the emerging Balkan economy narrowed to 1.0 percent of gross domestic product from 2.2 percent a year ago.

Bulgaria, which is recovering from a prolonged recession, aims to cut the deficit to 2.5 percent of GDP this year from 4.0 percent in 2010, helping to maintain economic stability and protect a currency peg against the euro.

Finance Minister Simeon Djankov has pledged to keep the deficit reduction programme on track in the run-up to local and presidential elections in October, even as the Balkan country's economic recovery slows.

Economic growth slowed to annual 2.0 percent in the second quarter from 3.3 percent in the first, as exports to key European markets eased and domestic demand remained sluggish.

The European Union's poorest state is striving to boost market confidence in the country by keeping its deficit under control in efforts to stave off the debt crisis that is plaguing neighbouring Greece.

Its efforts have been praised by rating agencies, with Moody's upgrading Bulgaria's sovereign rating by a notch to Baa2 with a stable outlook in July.

Bulgaria operates a currency board regime which restricts central bank operations, leaving fiscal policy as a key tool for influencing the economy. Large budget deficits would tend to put pressure on the lev currency.

Fiscal revenues rose 6.1 percent on the year to 16.2 billion levs through August, equal to 62 percent of the annual plan, mainly to an increase in value added tax and excise duty collection, the ministry said in a statement.

Spending stood at 16.97 million levs, up 0.8 percent compared to the same period a year ago.

Fiscal reserves, which Bulgaria is obliged to keep under its currency board arrangement, stood at 5.0 billion levs at the end of August, up from 4.9 billion levs a month earlier.