UPDATE 1-Lebanon prepares plan to restructure public debt-report

The Lebanese finance ministry is preparing a "financial correction" plan that includes restructuring public debt and will propose solutions to spare Lebanon "dramatic developments", the finance minister was quoted as saying on Thursday.

Lebanon has the third largest public debt-to-GDP ratio in the world at around 150 percent and has suffered from years of low economic growth.

Ali Hassan Khalil told al-Akhbar newspaper the plan had not been revealed to anyone. "This matter requires decisions in cabinet, the involvement of parliamentary blocs and the central bank, ... and others who are concerned with the solutions that we will propose to spare Lebanon dramatic developments".

"The public debt cannot continue in this way," he said.

Fitch and Moodys both last month revised the outlook on Lebanon to negative from stable.

"What we are saying today is that the country cannot not be managed with the same previous policies, and the public debt cannot be left on this same path," Khalil said.

"We must strive to increase tax collection, and to review public debt servicing," he said.

The International Monetary Fund urged Lebanon in June to carry out "an immediate and substantial fiscal adjustment" to improve debt sustainability.

Lebanon has been without a new government since May as politicians continue to wrangle over the make-up of a new national unity cabinet. (Writing by Tom Perry; Editing by Toby Chopra)

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