Alain Bifani: “For a very long time, Lebanon has struggled with governments that were unable or irresponsible.”

Former Director General of the Lebanese Ministry of Finance and a key player in the fight against corruption, Alain Bifani resigned in 2020. Today, he offers a stark assessment of the country's economic situation.

What, in your view, are the main challenges the new Lebanese government will have to face in a context of ongoing crisis, increasing tensions, and regional instability?

For a very long time, Lebanon has struggled with governments that were unable or irresponsible, due to foreign interference and to very poor governance. For a start, the government has to lobby hard to stop the Israeli bombardments, and work with parties involved in Syria to pacify the eastern border, as security is critical for any recovery path. The government is now in charge of war and peace and is strongly supported by the US, Saudi Arabia, and France, which puts it in a good position to do so. The drawing of the borders seems like a low-hanging fruit to take quickly. In parallel, the authorities need to preserve civil peace and strengthen national cohesion - both essential for stable growth – through tangible support to the displaced and enough care given to all Lebanese groups. Destroyed areas must be rebuilt, and the parts of the population who used to live on the side of the system need to be reintegrated within the nation. This requires the government to address the reforms needed for a program that would unleash support from development banks and similar players. Also, the defense strategy that was mentioned in the president’s inaugural speech and that will determine the fate of Hezbollah's arsenal and comfort the inhabitants of the South, is now a priority, and it seems within reach if we listen to Hezbollah’s leadership. A definitive solution should be found to other armed groups, particularly in the Palestinian camps that need to be pacified and reorganized, and the Gaza tragedy has slightly opened the door for that. Not least, the government must responsibly manage the issue of Syrian refugees and arrange for their orderly return. It will need to use its allies’ influence to organize the process with the Syrian side, the said allies having now lost interest in keeping the refugees in Lebanon after the fall of the Assad regime.

On structural issues, the relevant ministries should work on providing critically needed efficient infrastructure and social safety nets, given the rise of poverty levels and precariousness. It goes without saying that the judicial sector still awaits deep reform, that the government needs to rebuild the public administration (and this will require parliament to pass laws), that the Lebanese Armed Forces should focus on getting modern and adequate equipment to be able to respond to the various challenges, instead of only increasing the number of the troops. A lot of funding will be needed and, ideally, the government – while forcefully restoring the legitimacy of the state - should develop a "made in Lebanon" recovery plan to negotiate with the IMF and/or with bilateral and multilateral donors (the government can use the one we prepared in 2020 as a base, as not much has happened since). The execution of the plan will establish a new transparent and trustworthy banking sector, do justice to depositors and citizens, deal with the consequences of neighboring crises, halt the ecological disaster, and save the education and social system. None of this is realistically achievable without reining in the politicians and the bankers who went rogue since the 2019 crisis, and that requires courage and engagement on behalf of the government. On the institutional level, it is time to come back to the Constitution, and to a state of Law. 

With Lebanon’s public debt now estimated at five times its GDP, many observers question the sustainability of the country’s economic model. In your view, what concrete steps—beyond short-term fixes—could help rebuild financial credibility and put the country on a more stable fiscal path?

As a matter of fact, the present model is totally unsustainable. The crisis should have triggered a full-fledged program for a new beginning, and that was precisely the purpose of the exhaustive program we prepared in 2020. At that time, it was hailed by the international community, but it was then torpedoed by the corrupt political and financial elites. Instead, the country was left in a freefall until now.

A lot has changed, though, and many things that looked unthinkable have become possible. Politically, the present government is free to act. The excuse of a powerful armed militia has vanished. And six years after the financial crisis, it has become clear that the choices made in favor of the financial and political elites were wrong, and lessons must have been learnt. Even parliament will find it difficult to obstruct reforms that are pushed by the government and supported by potential donors and lenders, just like what happened with the banking secrecy law. In contrast, when I pushed for the elimination of banking secrecy for non-residents in 2018, we finally succeeded thanks to the pressure of our foreign counterparts, but parliament totally opposed eliminating banking secrecy altogether, as I recommended.

In few words, to rebuild financial credibility, the government needs to put together a program covering fair banking and debt restructuring, a solid growth agenda, fiscal and structural reforms, and safety nets. And for once, it should be implemented. Depositors should be given priority in full respect with the hierarchy of losses to rebuild trust in the new banking system, while pro-growth policies should be favored to bring back GDP to its 2018 level within five years, backed by fiscal streamlining with a primary surplus above 1% of GDP. Given the magnitude of the last crisis, double-digit growth is within reach. Political spending is no more welcome, and the magic couple ought to be efficiency and fairness.

Lebanon is entering its sixth year of economic crisis, with a GDP contraction of around 5.7% and a slowdown in inflation, which nevertheless remains at extremely critical levels. In your opinion, which are the most urgent reforms to implement to get the economy back on track?

Definitely, a proper restructuring of the banking system is key, because the economy needs a financial backbone to grow properly, and this is a task that falls on the central bank and the government (via the ministry of Finance) together. Trust should be restored, and it requires fair solutions that protect depositors and public assets.

In terms of public services, energy should no longer be neglected (including the rationalization of the use of renewables), access to decent social services is critical, and specific parts of the public administration require urgent modernization on the very short term. And again, I am not even talking about security. These topics should be the main components of a program to be submitted by the Lebanese authorities to the international community to set a proper base for discussion and reestablish confidence in the future of the country.

Of course, these efforts cannot neglect the big number of Lebanese who lost their money, their pension and most of their salaries in real value. This part of the population requires special care, and as I said before, double-digit growth is needed to absorb the cost. Unleashing the potential of Lebanon and taking it out of the corrupt elites’ grip can’t wait any longer. And to argue that there is only one year left before the general elections is certainly not the right thing to do.

Throughout your career in the Lebanese senior civil service, you’ve consistently prioritized the fight against corruption—an issue that remains deeply entrenched, with Lebanon ranked 154th out of 180 countries by Transparency International. In your experience, what makes corruption so resilient in the Lebanese context, and what concrete steps beyond rhetoric are truly feasible to begin reversing this trend?

The inefficiencies of the system have been feeding what I define as ‘small corruption’ for a long time. For things to happen, people are willing to pay. This part should be sorted out with processes and systems by the government. But on the bigger scale, the structure of power itself is in question. The weakness of the government in front of armed groups or political clans, the inefficiency of the judiciary, and the consensus-driven decision-making, all under the pretext of communitarianism and clanism, fuel the cycle of large-scale corruption. Cronyism and exclusive domains flourish under that.

In the past few decades, there was simply too much doubtful money in the system, and the counter-powers such as media, the judiciary system, and the unions, succumbed to the appeal of dirty money, which is concentrated in the hands of few players who can twist the story in any way they want. This concentration is very detrimental to the economy. For instance, for years, the only advertising in the media came from the banking system, creating allegiance and sometimes more. The “money is everything” culture has spread insanely, and people have surrendered to the “anyone would do the same” story.

At the end of April, Lebanon announced the lifting of banking secrecy under pressure from the IMF. Do you believe this is enough to restore Lebanon’s credibility with its international partners? What other steps must the country take to improve global confidence in Lebanon?

It is one thing to have the tool, and another one to use it. Some lawmakers tried very hard until the last moment to introduce exceptions, showcasing that the willingness to use the tool and to establish total transparency remains limited at the level of politicians. Yet, it is a welcomed first step, and using it to recover stolen assets would certainly help restore confidence. However, no isolated measure will do. There remains a need for a credible path towards a long-awaited restructuring and a growth agenda that would both favor the population against the well-established kleptocracy, and only that would balance the fiscal and external accounts in a sustainable way. A unified government, backed by the president and a majority at parliament, going to the international community with a credible and comprehensive plan over five years and including new financial system soundness, fiscal robustness, growth vectors, infrastructure, safety nets, and good governance – away from vested interests - is certainly the way to restore credibility, mobilize local and international support, and unleash the formidable potential of the Lebanese.

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