BEIRUT, Sept 29 (Reuters) - Lebanon's 2005 draft budget offers sweeping reforms that are essential for financial and economic recovery, but doubts persist as to whether they can be implemented, analysts said on Wednesday.

Lebanon has struggled to record lower budget deficits as part of an attempt to arrest a public debt that is among the world's heftiest at some 185 percent of gross domestic product.

The draft budget projects a deficit of 25.2 percent of spending and calls for scrapping the Ministry of the Displaced, the Central Refugees Fund and the Council of the South, according to figures released by the finance ministry on Tuesday.

It also limits volunteers in the army and internal security forces, eliminates a security body, cuts lawmakers' allowances and increases working hours in some public institutions.

The government still needs to approve the draft and refer it to parliament. Political bickering between top officials has for years played a major role in delaying reforms agreed with foreign creditors.

"The financial and economic problems we are suffering from today necessitate exceptional and all-out solutions in all sectors," Finance Minister Fouad Siniora said on Tuesday.

The local press called the draft "revolutionary" while some papers questioned whether there was enough political cohesion and will to go through with the reforms.

Hariri is expected to resign next week after parliament extended the term of Syrian-backed President Emile Lahoud earlier this month, despite local and international opposition.

But Hariri, a bitter foe of Lahoud, is widely expected to be asked to stay on and form a new government. Political sources said he would seek a "national unity government" grouping Christian and Druze opposition with loyalists.

A source close to Hariri dismissed criticism that the timing of releasing the draft was aimed at manipulating the formation of the new government. He said the government was obliged under the constitution to present a draft budget by October 19.

"There are no political motives," the source said. "This budget is very serious and real. It is necessary for the coming phase as the country needs a positive shock."

He said it was time the government tackled corruption.

"There is a need to close the gates of squandering public funds. These gates are known and it's time to shut them down."

POLITICAL IMPASSE

But some analysts said earlier vows to carry out reforms had reached a dead end due to political differences and fears of social upheaval.

"It is not the first time that reforms were proposed," Tony Hchaime, economic analyst at the Middle East Capital Group, told Reuters. "The implementation of this plan is not feasible. The political, economic and social situation in the country doesn't allow it to go ahead."

The draft budget puts 4,300 billion pounds, or 44.9 percent of all spending, toward servicing Lebanon's debt. The debt, much of it held by local banks which are main consumers of government paper, was at $31.87 billion at end-June.

Lebanon pledged structural reforms to pave the way for state asset sales when it got about $4 billion in soft loans from G7, Arab and Asian countries in 2002 to help ease the burden of its debt service.

But there has been little progress toward those reforms since then, partly due to squabbling between the president and prime minister, and the Lebanese government now faces the same debt problem with the soft money long since used up.

($1=1,507.5 Lebanese pounds)