JERUSALEM, Jan 11 Reuters Israel posted a budget deficit of 4.2 of gross domestic product in 2023, after a 0.6 surplus in 2022, due to a spike in state spending to finance the war against Palestinian Islamist group Hamas in Gaza, the finance ministry said on Thursday.

The deficit rose from an annual 3.4 in November.

In December, the deficit was 33.8 billion shekels 9.0 billion, versus 18.5 billion a year earlier, as spending on the war was 17.2 billion shekels, while tax revenue slipped 8.4.

Lawmakers last month approved a war budget for 2023 of around 30 billion shekels and cabinet ministers on Sunday are set to start debate and vote on a revised 2024 budget of tens of billions of shekels in extra funds that is expected to push the budget deficit to some 6 this year.

On Wednesday, Bank of Israel Governor Amir Yaron urged the government to stick to fiscal discipline and offset planned spending with reductions to nonessential areas while raising some taxes.

He estimated the Gaza war would cost 210 billion shekels for defence and compensation, excluding loss of income, for residents near the Gaza and Lebanese borders who have been displaced by months of crossborder rocket fire.

Israel last year approved a twoyear budget for 2023 and 2024, but the war against Hamas in Gaza has shaken government finances, requiring budget changes and additional spending.

The deficit last year reached 77.5 billion shekels.

Israel39;s initial 2023 deficit target was 0.9 of GDP, or 16.9…