Lebanon’s 2019 draft budget plan to tackle its pressing fiscal situation through spending cuts, revenue increases and refinancing of T-bills will likely fail to deliver a significant shift in the country’s debt trajectory, ratings agency Moody’s said.

Heavily indebted Lebanon unveiled a plan to bring its public finances under control in late May but faces an uphill struggle to restore the investor confidence that is needed to stave off crisis.

The budget - which has been sent to parliament for debate and approval - aims to cut the fiscal deficit to 7.6% of GDP from 11.5% in 2018 and implies the primary balance will turn into a surplus of 1.7% from a deficit of around 1% of GDP.

“This adjustment is achieved primarily via spending cuts and a limited increase in revenue,” Moody’s analyst Elisa Parisi-Capone wrote in a note to clients, dated May 30.

“According to our debt projections, the implied primary balance adjustment and the previously announced interest savings from the refinancing of high interest-rate T-bills with lower interest-rate T-bills with participation of the central bank and commercial banks, remain insufficient to significantly change the debt trajectory because of the persistent interest rate - growth rate differential.”

Moody’s said its base case was that the primary surplus would stand at 1.5% of GDP in 2019 and continually increase to 3.5% of GDP by 2023. However, assuming that interest bills remained at 10-11% and limited appetite to reduce the wage bill further due to a public pushback, the fiscal deficit would remain around 7.0-7.5%, Moody’s calculated.