Image credit: Mohamad Azakir - Reuters
by Jan Top Christensen
October 28, 2021
An interview with Alain Bifani (AB), former director general (deputy minister) of the Ministry of Finance, Lebanon, now president of the Lebanese Citizen Foundation, by Jan Top Christensen (JTP), former Danish ambassador to Lebanon.
This interview looks at the new Najib Mikati government, formed September 9 after 13 months of stalemate. Will it be able to satisfy the demands for reform from the International Monetary Fund (IMF) and the international community, required before they will help bail out the country? The interview also looks at Lebanon’s challenges in a larger economic and political perspective. At the end of the interview, Bifani explains the ideas behind his creation of The Citizen Foundation.
Alain Bifani was appointed director general in 2000. At age 32, he was the youngest person ever to assume that position in Lebanon. He served under 10 ministers of finance. Throughout his career, Bifani has been able to enact major reforms, despite fierce resistance from the establishment. He was a key figure in managing national finances for more than 20 years, including 12 of those years without a government budget. Bifani increased transparency by restructuring Lebanon’s financial situation through electronic taxation and other methods. He established the exchange-of-tax-information program, led by the OECD. Bifani also played a key role in eliminating bank secrecy for non-residents. Bifani holds degrees in optics and telecommunication engineering from the Institut d’Optique and in management and finance from Ecole des Hautes Etudes Commerciales, France. He resigned from his position in the Ministry of Finance in the spring of 2020 after aborted attempts to further reform state finances.
JTC: In late July, Lebanese president Michel Aoun appointed billionaire Najib Mikati as prime minister with a mandate to form a new government after Saad Hariri threw in the towel. Mikati, who is in his third term as prime minister, indicated that if he could not succeed within a short time, he too would give up. Now, some six weeks later, he has succeeded. In a Lebanese context, I believe six weeks is a relatively short time. But what kind of government is it? Does it meet the international community’s demands for a government of independent technocrats? And does it live up to the call from the demonstrators back in October 2019: “killu yaani killun” (all of them means all of them (must go)? (1. Makdissi, 439).
AB: Those six weeks follow a full year’s stalemate when Saad Hariri was prime minister without really trying hard to form a government. Six weeks in Lebanon’s tragic situation is very long. Clearly, the ruling elite deliberately left the country without a captain at the helm, so that it could fall into the abyss. When my team and I, together with the government’s advisor, Banque Lazard, came up with a restructuring and reform plan to end the crisis, we wanted those who benefited most from the system to contribute the most. We wanted to distribute the losses fairly, protect the most fragile, provide safety nets, implement structural and financial reforms, and restructure the banking sector, the central bank and the debt. But the ruling clans decided to sabotage it, along with the IMF program behind it. They wanted to avoid admitting the central bank governor’s wrongdoing, have the bank’s shareholders take the loss and prevent the reforms that would reduce their misappropriation of public money. I resigned to protest the torpedoing of the only valid plan on the table. In the meantime, central bank governor Riad Salameh started executing the “do nothing” plan in favour of the elites and at the population’s expense.
His plan was basically about letting the Lebanese currency depreciate (from 1,500 pounds to 20,000 pounds to the dollar within 18 months), and letting depositors take a major hit. We wanted to protect all small and medium depositors and have a bail-in of 30 per cent for the accounts bigger than half a million dollars, while the governor’s plan had already caused a hit of more than 90 per cent on all deposits across the board! And since he maintains several currency rates on the market to facilitate this criminal behaviour, businesses cannot kick-start their activities again and people are queuing for hours for a few litres of gasoline and to get their prescriptions filled. In such a context, a government should be formed within days and start acting immediately.
This kind of government will be unable to introduce the long-awaited deep reforms, let alone distribute the losses properly. It is backed by the same clans who led Lebanon into free-fall and who preferred to starve the population instead of taking any loss themselves. It is a restoration of the old system that was shaken up by the popular movement, as the clans succeeded in receiving foreign recognition under the pretext of a humanitarian emergency. We are back to square one. This government will protect those who misused public money, those who smuggled their money abroad while de facto controls prevented normal citizens from accessing their accounts and those who committed financial crimes. The fact that some ministers are technocrats by no means suggests change. The government is in the hands of the clans who control parliament and who are working against Lebanon’s interests.
If the IMF continues trying to establish a solid program in Lebanon and if it does not compromise on its principles, this team will be totally unable to produce, because they don’t even want to admit the losses in the system. Already, the government is stating that what is needed is a “bank reform,” which is far less than the necessary restructuring. The banking sector is bankrupt and as long as they refuse to admit it, they cannot properly deal with the situation. Depositors will continue to be affected so as to avoid putting the losses onto the shareholders, who are often part of the corrupt system. Had the international community been mobilized to help Lebanon, it would never have accepted such a simulacrum with a cabinet backed by frequently absent politicians. But there is a Lebanese fatigue in the world’s chancelleries. For the demonstrators of October 2019, this has to be the hammer blow. This goes against everything they called for, including reforms, accountability and audits, and modernization. Instead of “all must go,” all are here. As a matter of fact, nobody wanted this government, not even those who formed it. But since elections are in less than one year, and since the SDR’s allocation from the IMF provided them with $1.3 billion to spend on electorally motivated issues – allowing them to survive until then while the population suffers unbearable harm – they did so. Knowing the electoral process they run, they can reasonably believe that they will regain legitimacy after those elections and they will continue to rule a country that will look more like the most underdeveloped ones and a population that will have seen its top talent and most of its youth emigrate. They will still be here, but it won’t be Lebanon anymore.
JTC: I note that the new finance minister is Youssef Khalil. He was a senior official at Lebanon’s central bank and is said to be the architect behind Lebanon’s infamous “financial engineering,” also called a Ponzi scheme (1. Makdisi, 441). You yourself were a key actor in the negotiations with the IMF until you resigned in spring 2020. How likely is it that the new finance minister and the new government will be able to put together a reform package that will satisfy the IMF and the international community (2. Amer Bisat)?
AB: As of today, the only thing we know about the infamous so-called “financial engineering” is that the governor of the central bank himself chose the beneficiaries and the amounts without consulting anyone and without asking for any approval. There were very large amounts of public money given to some banks, but also to financial companies and individuals whom the governor chose to enrich, supposedly because they could bring fresh dollars into the system. We later discovered that he started those operations when the inflows of capital to Lebanon decreased and were no longer enough to cover the needs of his Ponzi scheme. Of course, people from the central bank’s staff executed it, but the governor engineered it. He was also behind the sabotaging of the IMF’s plan together with many bankers and the governing clans’ representatives in parliament.
Youssef Khalil is a competent person, but I can understand why the Lebanese would be very upset with his appointment. He is close to a governor who orchestrated a Ponzi scheme. And as I said, it is not about individuals. This government will not even try to implement the needed reforms and use the crisis to make this horrible system evolve. To the contrary, it is going to try to lull the Lebanese people into believing that what happened was the only possible outcome. As usual, they will pretend that in Lebanon, nothing can evolve for the better. The reform package that makes sense includes the proper restructuring of the central bank and the commercial banks, and they will not do it. It includes stopping the seizure of public funds for the clans’ benefit, but what happens is likely to be the opposite of that. They will probably resume discussions with the IMF and they will pretend they want to reach a deal, but it will be for show. All clans (they call themselves political parties) agree on one thing: no IMF deal for now. The problem is that they have left Lebanon with no other option!
JTC: Lebanon has been exposed to external interference since it was carved out of the Middle East as an independent (Christian-dominated) country after the First World War by France and the U.K. We know that “Papa” Macron, France’s president, has been very active in trying to facilitate a solution for Lebanon. To what extent is the formation of the new Mikati government the result of arm twisting by international players such as France and the U.S.?
AB: The only foreign players actively involved in Lebanese politics are Iran and France. After the Beirut port explosion on August 4, 2020, President Emmanuel Macron visited Lebanon with an interesting initiative. He had the perfect solution. He asked for an audit of the central bank and he asked the elites to leave room for the formation of a government consisting of respectable technocrats, as the international community was unwilling to continue to deal with the usual thugs. The carrot was that he would bring back international involvement and support, and the stick was the sanctions he suggested would be used against the corrupt troublemakers. But during his second visit, he dropped his two weapons: he said sanctions were not on the agenda, and he dismissed – too quickly, in my view – the popular movement’s ability to create an alternative. At that point, the Lebanese clans renounced their commitments, and France was left searching for any improvement while the Lebanese people’s situation worsened daily. The fallback plan was to provide humanitarian relief, at a minimum. So France started to call for the formation of any government possible. I believe this will prove to be a major mistake, as it will keep this rotten system afloat with potentially more harm inflicted on the Lebanese. The hardship is terrible, but there should be no reason to reward those who created it. So in this sense, the new government goes along with the French approach, but I doubt it will deliver on serious issues. The U.S. has not been actively involved in the process, and it seems like this government is meant to stabilize the system according to foreign players, with some waiting for better conditions to achieve change and others wanting to stop the free-fall.
JTC: Today, many, including BBC World (3.), describe Lebanon as standing at the brink of the abyss. Within the last two years, the Lebanese pound has lost 90 per cent of its value, 70-80 per cent of the population is estimated by the World Bank (4. WB report) to live in poverty and people only have electricity a few hours a day, if at all. There is a lack of basic medicine, food is scarce and the debt ratio has reached unprecedented levels. The COVID-19 crisis and the huge port explosion last year have caused part of what is called “Lebanon’s worst economic and financial crisis.” But we know that the crisis started earlier than that and led to the huge demonstrations of late 2019. Rami Khouri has said that Lebanon has lost its once distinct status from other Arab countries. Today, he sees the country as “just another pauperized and increasingly militarized Arab country whose citizens rebel (against) its state authorities” (4. Khouri). So, what are the fundamental structural problems in the Lebanese economic and political system?
AB: I share Rami Khouri’s views. Blaming it on COVID and the Beirut port explosion would be totally false. Lebanon’s economy has been declining for a very long time, since the beginning of the Second Republic (1990 ff). The new system was about seating the warlords and heads of clans around the table and satisfying them with misappropriated public money. The war was taken from the streets into the institutions, including inside the cabinet, which was never able to deal properly with any major issue. Everything was deteriorating and corruption kept rising until the end. It is a system without a head, where presidents and ministers are above the law, and where the council of ministers can take illegal decisions. No proper control exists, not from parliament, which is held by the clans, nor by the judiciary, which has been decimated. Decisions are only taken if they materially satisfy all groups, which means that decisions are never optimal and always extremely expensive. Because of this system, the infrastructure has deteriorated and public enterprises looted, while the social safety nets were demolished by partisan policies and irresponsible behaviour. Indebtedness kept rising even when there was no need for it, as debt issuing was increasing bankers’ profits together with their political partners’ wealth. Criminals are never punished, apart from the small fish. This system uses fear to obstruct any reform. Christians are told not to let change happen because they would lose more ground, and Sunnis are told that it would make them lose what the Taëf constitution gave them (JTC: the Taëf agreement, officially the National Reconciliation Accord, ended the civil war in 1989), and Shia are told that the whole world is after them. Nowadays, the only thing people have in mind is to leave the country as soon as possible, as they see nothing positive on the horizon.
JTC: Optimists see a chance for renewal in the Lebanese parliament at next year’s elections. But is that realistic? We have seen that the demonstrations which began in October 2019 (triggered by a new tax on otherwise free internet-based telecommunications) gradually fizzled out. The 2020 port explosion gave the demonstrations new life for a while, but the dire situation forced people to focus on daily survival, and despite many initiatives, it seems as if no credible political alternatives emerged. The sectarian political system is still there, and some would argue that it may have been reinforced by the deep crisis, because people had nowhere to go except to seek help from the patrons of the sects. How do you see developments up to the elections? Is it realistic to think that the many different civil society initiatives can be merged into one strong political alternative with a convincing platform?
AB: This system does not allow for any convincing platform. If the opposition did not come up with one, the ruling parties are even far less convincing. It is a clannish tribal system which leaves no space for credible programs and it should be toppled. The sectarian system you are referring to makes it very difficult for people to choose among clear options. The elites have convinced them that Lebanon will never become a modern state, and that change can only be short-lived. Therefore, people do not dare align with opposition groups because they fear they will sooner or later have to go back to the clan leaders when they need jobs or support. Ideally, you do not change such a perverse system through elections organized by that very system, as you have very few chances of winning. The upcoming elections will be an opportunity for the existing elite to regain some legitimacy after it lost all credibility, as they are better organized, they can use public money to buy votes and support – including the money from the SDRs – and they rely on blocs of voters who sometimes have neither the ability nor the will to judge. So the opposition groups’ goal is to have a relatively strong representation, but that is far from being enough to give Lebanon what it needs. Nevertheless, it would be better than nothing, and we have yet to see how the alternative will organize itself.
JTC: What about the role of the Lebanese diaspora? It is well known that there are more people outside Lebanon with Lebanese roots than inside Lebanon. How important is this diaspora for the survival of people during the present crisis and what role do you see for the diaspora at the elections next year and beyond?
AB: The Lebanese diaspora has always been key to the prosperity of the Lebanese intra muros. It is also often very willing to help, as most of its members have left Lebanon – or their ancestors did – because of hardship. Nevertheless, there is an important cultural gap that developed between the Lebanese inside Lebanon and their diaspora, more precisely since the 1990s and the end of productivity in Lebanon, as many locals became obsessed with short-term profits and easy money. Nowadays, though, a lot of help is coming from the diaspora and newly organized groups are making remarkable efforts to help at various levels, including with the elections. Help is extremely important in these difficult times, but some would argue that it is effective to the point that people are not rebelling enough! By the way, electoral law supposedly allows the diaspora to participate, but the law is twisted enough to minimize its impact.
JTC: For many years, Lebanon has been squeezed in the power competition between Saudi Arabia and Iran. Saad Hariri, himself also a Saudi citizen, may have been able to secure assistance from the Sunni kingdom of Saudi Arabia, but what about Mikati, who does not have the same close links to the SA? What are his chances of winning support from Arab countries?
AB: I do not believe at all that Saad Hariri can still ensure he will get any assistance from Saudi Arabia. He has clearly lost the Kingdom’s confidence and it’s the same for Najib Mikati. Saudi Arabia has temporarily withdrawn from daily Lebanese politics out of disappointment with their former allies in whom they invested a lot without significant returns, and because of what they describe as Hezbollah’s and Iran’s control of Lebanese politics. In other words, any sizable support from Gulf countries will not be available, and we all know what this means. It means that the usual game of begging for money that these elites have mastered does not work anymore. The alternative is obviously to take our destiny in our own hands and embark quickly and efficiently on all the required reforms to build a modern state. But this is certainly not the team to do that.
JTC: How do you see Iran’s role? We know that Hezbollah is closely connected to the biggest Shia country. Mikati’s new government has 24 ministers, two of whom represent Hezbollah, but they may have a bigger say than indicated by their small number. Will the IMF (and the U.S.) be prepared to deal with a government with Hezbollah ministers, given the fact that Hezbollah is on the American list of terror organizations? And to what extent does a sustainable solution for Lebanon depend on a new nuclear deal between Iran, the U.S. and other parties to the previous deal, to prevent Iran from developing a nuclear military capability?
AB: Lebanese governments have included Hezbollah ministers for a long time, including the governments of Saad Hariri and Najib Mikati, and that of Hassane Diab. The IMF never raised this issue and was more than ready to deal with the government. It welcomed the recovery plan that my team and I prepared with Lazard, which the Lebanese government unanimously approved. And a few days ago, the IMF spokesman reiterated the institution’s readiness to negotiate with the Lebanese authorities. With regards to the U.S. and other countries that have Hezbollah on their list of terror organizations, they have been dealing with ministries that are not headed by a Hezbollah minister, and I think this will continue for now.
At the regional level, Lebanon is obviously a strong card for Iran because of Hezbollah. Recently, we have seen economic difficulties in Iran but also political resilience, and the talks with the U.S. do not seem to be moving forward, at least not at a fast pace. If those talks collapse, tensions in Lebanon will immediately rise, but it remains to be seen whether Lebanon will be part of any deal that is struck. What is certain is that the inability of Lebanese traditional parties and clans to put their house in order makes it tempting for foreign powers to deal with the most structured and organized party in the game.
JTC: To what extent can other external players influence developments in Lebanon? Is there a role for the EU to play? What about China? Hezbollah’s leader, Hassan Nasrallah, has suggested that Lebanon must “look east” to China for its salvation (6. Foreign Policy; 7. International Crisis Group).
AB: The EU’s role could have been a major one if it had been able to develop its own coherent policies. As Lebanon’s main trade and economic partner, it would have been an ideal anchor. Unfortunately, the EU is not yet a political player. A few days ago, though, the European parliament passed a resolution calling for sanctions against corruption in Lebanon, emphasizing the importance of implementing our recovery plan and blaming those who sabotaged it. This is certainly a good start, but we have to wait and see whether the Lebanese executive will take concrete actions in this direction. As for the Chinese, they are very cautious in the region, and Lebanon is probably too small a market for the risks attached. Of course, China and Russia are following developments, but are not directly involved in the political process. The “look east” falls in the context of the Western sanctions and unwillingness to deal with Hezbollah, and requires the will of the eastern partners, knowing that it would trigger Western retaliation. Last week, though, Hezbollah received fuel from Iran through Syrian ports to distribute in Lebanon without triggering significant opposition from Western countries, and this tends to show that as usual, the protagonists will treat this file on a piecemeal basis.
JTC: For now, hope may be attached to Mikati’s new government and the chances of a deal with the IMF. But if we look beyond Mikati, do you see any light at the end of this very dark tunnel? Are there any embryonic hopes for the Lebanese? What about the economic potential of the oil and gas resources in Lebanese waters? What about the recent success of independent civil society candidates at the syndicates’ elections? Is there a chance that the famous, vibrant Lebanese entrepreneurial ecosystem can be jump-started? (8. Executive Magazine).
AB: I do not attach hope to the new government, but I have faith in my country. Our youth are remarkable, talented and brave. They want a different model, and they are not prisoners of past divisions. They are the real wealth of Lebanon, not the potential oil and gas riches. If we discover oil and gas now, the rotten elite will seize it and it will give them more time. It would increase inequalities and concentrate more wealth and power in the wrong hands if they were to manage it. The success of independent candidates in the syndicates’ elections proves that when the game is not twisted, the Lebanese make the right choices. If this archaic and criminal system is toppled, its hijackers are sidelined and the seeds of a modern state are sown, we have everything we need to succeed. When you look at the Lebanese success stories around the world, it looks very promising.
JTC: How do you see your own initiative, the Citizen Foundation, fitting into Lebanon’s political and economic development in the months and years ahead?
AB: When I resigned and when I told the Lebanese people what I thought was being prepared against them, I thought that not much could be done from inside on the short term. I decided to put my energy and the experience and network that I built into the service of Lebanon in the medium term. I gathered a top team of very high-level economists throughout the world and we started the Citizen Foundation for Lebanon and the Arab world. The foundation’s goals are to promote citizenry, a major element on a modern state’s path, and to provide Lebanon and other countries with adequate public policy options. The latter is extremely important because our political parties, or should I say our clans, and our governments have not proposed anything at any level since the 1970s. One can easily imagine what happens when a country does not act on its social sectors, infrastructure, main policies and major challenges for so long. We are already working on migration and labour, taxation, inequalities, gender, the analytics of gas in the Mediterranean, potential added value and many other topics. I strongly believe that creating a debate around such critical policies is very valuable, especially with the youth, and that any future government that really means business can use our work. We do not want to force anyone to follow our options, but we certainly want any person politically in charge to state her options (with or against ours) and implement them, instead of having useless and incompetent ministers explaining why they cannot do anything good. Lebanon has had too many of those, and you can tell from the results.
The interviewer, Jan Top Christensen, spent 30 years in Danish diplomacy after some years in academia, followed by three years with UNHCR. He covered a broad spectrum of fields in the Ministry of Foreign Affairs, including five years as deputy director general for the Department for the Middle East, North Africa and Latin America, and in 2007 he reopened the Danish embassy in Beirut where he served six years as ambassador. Today, he lives with his Canadian wife and daughter in Ottawa, Canada, where he is a Fellow at the Canadian Global Affairs Institute and an independent consultant.
JTC has published two articles (in Danish) about Lebanon: 1) “Is an Arab Spring Possible in Lebanon?” Militært Tidsskrift, 2011, no. 3; and 2) “Conditions for Christians in Lebanon,” Kristeligt Dagblad, September 23, 2013.
- Karim Makdisi, “Lebanon’s October Uprising: From Solidarity to Division and Descent into the Known Unknown,” South Atlantic Quarterly, April 1, 2021.
- Amer Bisat, Carnegie Middle East Center, August 25, 2021.
- BBC News, “Lebanon in Free-Fall,” May 17, 2021.
- World Bank, “Lebanon Sinking (to the Top 3),” Lebanon Economic Monitor, Spring 2021.
- Rami G. Khouri, “Lebanon Joins a Frayed Arab Region,” February 2021, Middle East Institute, https://www.mei.edu/publications/lebanon-joins-frayed-arab-region. ForeignPolicy.com., 07/09/2020.
- International Crisis Group, “Avoiding Further Polarization in Lebanon,” September 9, 2021.
- Thomas Schellen, “Contrarianism Squared,” Executive Magazine, September 6, 2021.