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UPDATE 1-Lebanon's central bank operating normally despite protests blocking entrances

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Beirut, May 13 (Reuters) - Lebanon's central bank is operating as normal despite retired soldiers blocking its entrances in protest against pension and benefit cuts as the government debates a draft budget, a central bank official told Reuters on Monday.

At least 100 protesters gathered outside the central bank late on Sunday, while Lebanons coalition government held its latest meeting to try to agree on a budget that would reduce the fiscal deficit in the heavily indebted state.

"The bank is operational and the market is proceeding as normal," a central bank official, who spoke on condition of anonymity, said.

A central bank employee told Reuters workers had managed to get in the bank last night and would work as normal.

Protesters are blocking the main road outside the bank, choking rush hour traffic on one of Beirut's busiest streets.

Retired soldiers have been among the most vocal opponents of reported cuts in the draft budget, blocking roads with burning tyres to protest any cuts to their pensions and benefits.

The government said on Friday it had agreed to tighten the allocation of financial incentives that are intended for soldiers on frontline duty but applied more widely in practice.

With Lebanon suffering from years of low economic growth, long-stalled reforms are seen as more pressing than ever.

But the strikes and protests point to the political difficulties facing Prime Minister Saad al-Hariris unity government as it seeks to craft a budget to narrow a gaping deficit.

The public-sector wage bill is the governments biggest expense followed by debt servicing costs and the big subsidies paid annually to the state-owned power producer.

Lebanon has public debt equivalent to 150% of gross domestic product (GDP). The draft budget aims to reduce the deficit to below 9% of GDP from 11.2% in 2018.

(Reporting by Alaa Kanaan, Laila Bassam and Amina Ismail Editing by Clarence Fernandez and Nick Macfie)