LONDON  - Lebanon's government on Friday welcomed a contribution by local banks to a financial recovery plan but said there were issues that will need to be reconciled between the two sides.

The Association of Banks in Lebanon this week published a proposal for helping Lebanon recover from its financial crisis after criticising the government's rescue plan, which forms the basis for negotiations with the International Monetary Fund. 

In a statement, the government said the banks' proposal contained an "encouraging consensus on some of the key issues", but that some details were not fully addressed and there were areas of difference.

The government will continue engaging with the association and its advisers to seek solutions to the crisis, it added.

The association, whose members are among the largest holders of the government's debt, had complained that it had not been consulted on Beirut's plan, which sets out tough measures to resolve a crisis including a currency crash, soaring unemployment and a sovereign debt default.

In response to the government's statement, a source close to the association said banks looked forward to working with the government on promoting a prosperous economy and the welfare of the population.

"We are hopeful that we can reach a mutually acceptable solution in the interests of all Lebanese," the source said.

"Lebanon is a regional knowledge powerhouse and given the proper policies can start growing significantly, starting in 2021."

Lebanon began talks with the IMF last week in hopes of securing about $10 billion in financing. It is looking for about $11 billion more from other donors.

The association's proposal, issued on Wednesday, called for a debt restructuring that minimised the damage to Lebanon's nearly 3 million depositors and tapped state assets to avoid damaging banks.

(Editing by Carolyn Cohn, Hugh Lawson and Jan Harvey) ((Tom.Arnold@thomsonreuters.com; +442075428510; Reuters Messaging: tom.arnold.thomsonreuters.com@reuters.net))