The figures for the last six months of 2020, which were discussed during Thursday's council meeting, showed an underlying deficit of $5.3 million compared with a forecast deficit of $6.8 million.

This deficit will reduce further to $3.8 million when the council receives funding under the federal government's financial assistance grants program in June - an amount which was included in its initial deficit forecast.

It means the council's deficit is effectively $3 million lower than forecast for the first six months of the financial year.

The loss of revenue for parking fees, reduced visitation to the Launceston Aquatic Centre and Queen Victoria Museum and Art Gallery, and a downturn in city development continued to weigh down on the city's finances, according to the report.

Despite this, the council still received $2.9 million more in fees and charges than it budgeted, reflecting the lack of lockdowns and return of interstate travel towards the end of 2020.

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The report found that "most" of the council's sites were "able to operate in a relatively normal manner" since mid-2020.

A series of asset swaps with the Department of State Growth did not go in the council's favour financially, resulting in a worsening depreciation figure.

Councillor Hugh McKenzie said the financial reports, as a whole, were "a really good result".

"The reality of it is it's a good start that we've done what we've done so far, but having said that, we still need to make sure we manage our resources because we budgeted the way we did," he said.

"We still need to ensure that manage all of the expenditure that we've got because we've got a responsibility to our ratepayers."

The City of Launceston's loan balance at the end of 2020 was $15 million, although that is all interest free.

It includes a $9 million loan in 2016/17 for the C.H. Smith car park project, due to the repaid in February next year. The remaining $6 million was borrowed for the purchase of the old Birchalls car park for the relocation of the St John Street bus interchange, but a deal with the landholder is yet to be reached.

The City of Launceston has also approved a further $20 million interest free loan - to be repaid in three years - under a Tasmanian Government COVID-19 stimulus package for capital and operational expenses. Last month, $10 million of that loan was drawn on.