The resignation of two of Lebanon’s most respected financial officials in the span of a fortnight has raised fears among civil society that there is no bottom in sight in the country’s ongoing financial collapse.
In a dramatic press conference Monday evening, Finance Ministry Director General Alain Bifani told the public he had made his decision to quit after exhausting all attempts at righting the ship.
“Today, we are witnessing a new stage of taking over the Lebanese assets, a crushing of the poor, and forcing those making minimum wage and basic salaries to foot the lion’s share of the bill,” Bifaini said from the Lebanese press club.
Without naming names, he accused the Lebanese political and financial establishment of refusing to bear any losses, and instead engaging in a “state of denial, procrastination, and treasonous campaigns,” sabotaging Lebanon’s ability to negotiate with the IMF.
For Sibylle Rizk, policy director at Lebanese civic organization Kulluna Irada, the resignation of Bifani is “a symptom of the gravity of the situation in Lebanon.”
“Alain Bifani is not a no one. He’s been the director general of the Ministry of Finance for 20 years, doing his best from within the system to implement reforms. The fact he just quit means he has lost all hope,” Rizk told Asia Times by phone.
Together with financial advisor Henri Chahoul, who resigned in protest from Lebanon’s IMF negotiations team mid-June, Bifani had been a key author of the Diab cabinet’s blueprint to steer the country out of the crisis.
Bifani accused Lebanon’s ruling sectarian elite of torpedoing that plan, which aimed to reclaim a relatively minuscule percentage of the billions those elites had accumulated in their positions of power over the years.
“Financial and political forces – who are intertwined in this country – have hijacked the crisis management process to maintain their grip on power,” added Rizk.
This comes “at expense of Lebanese citizen, who is left alone, naked and without the protection of the state during one of the most severe crises in the world.”
Elites reject reform
Nasser Saidi, former first vice governor of the Lebanese central bank, said the high-profile resignations made clear that “the path of reform is being actively obstructed.”
“Negotiations with the IMF are being jeopardized and Lebanon is heading into a continuing financial meltdown and economic collapse, with accelerating inflation and depreciation of the Lebanese pound, leading to rising poverty levels and famine.”
The IMF, from which Lebanon is seeking a $10-billion bailout, has in recent days expressed deep concern over the internal disputes on the Lebanese side of the negotiating table.
“It has been really difficult, and the core of the issue is whether there can be unity of purpose in the country that can then carry forward a set of very tough but necessary measures,” said IMF Managing Director Kristalina Georgieva on Friday.
“We do not yet have a reason to say there is a breakthrough, and I’ll tell you, it breaks my heart.”
Rizk said, “When the IMF tells you their heart is broken that means we are in really tough shape. It means as Lebanese we’re not being able even to negotiate with a third party coming to help in the form of liquidity injections.”
Rizk points out that even if Lebanon wishes to approach China for support, it needs a functioning state and institutions that can negotiate on its citizens’ behalf.
Harbinger of doom
When Bifani was appointed general manager of the Finance Ministry 20 years ago, he was just 32 – the youngest person ever to assume the role. At the time, he vowed to fix the system and tackle corruption, recalled Lebanon’s Al-Akhbar newspaper.
Bifani’s relationship with most of the nine finance ministers he served under could be categorized as “cold war,” but in April, the technocrat and his allies succeeded in convincing Prime Minister Hassan Diab and Finance Minister Ghazi Wazni to adopt a bold rescue plan.
That plan called for those who profited the most off of questionable financial practices of the past to play a major role in compensating for the losses of the banking sector.
Al-Akhbar declared the technocrat’s resignation as “a harbinger of the worst.”
“Eliminating Bifani from the decision-making circle is a victory for the ‘party of the banks’,” wrote Al-Akhbar’s Léa el-Azzi, in reference to elites with interests in the financial sector. The banks, she says, activated their allies in parliament to build up opposition within their own blocs in opposition to Bifani’s plan, until the reform blueprint became an “orphan.”
“Bifani’s resignation is a dangerous indication of what will happen in the country. The people will pay the price of the losses that they were not involved in creating, and the depositors whose bankers gambled away their money will become slaves to the shareholders,” Azzi wrote.
The next stage, the paper assessed, will see a further socio-economic collapse. The signs are already evident.
The Lebanese military on Tuesday, in a cost-saving measure, announced it would discontinue serving meat in soldiers’ meals. The price of beef in the northern city of Tripoli, known for its poverty but also home to some of the wealthiest dynasties in the country, has more than tripled in recent months from 15,000 Lebanese pounds to 50,000. On Monday, the popular Facebook page Tripoli News Network published a list of 35 vegetarian dish suggestions, “as preparation for the next stage.”
While the Lebanese central bank continues to assert an official exchange rate of 1,500 Lebanese pounds to $1, banks have begun paying out dollar-denominated accounts at a “market” rate of 3,800 pounds and prices of goods have tripled. The street rate on Tuesday reached more than 8,000 pounds to the dollar.
“There is no floor anymore to the currency devaluation, which is exponential and in free fall,” said Rizk. “This is a very very dangerous phase of the crisis because if we don’t act immediately there is probably no going back.”
Lebanon’s once-thriving middle class is in the process of being eviscerated, while poor families are increasingly unable to put food on the table. Even the well-off who ran successful businesses are watching small empires collapse, forced to sell off assets to sustain imports, and grappling with the idea they may not be able to send their children to the best schools and guarantee them the life they had hoped.
“The Lebanese people will be very poor, and a US dollar will be able to buy loyalties and assets at a very very low price,” said Rizk. She warns this could end up reinforcing prevailing clientelism and sectarian divisions. It also means Lebanon’s state assets, which the Association of Banks in Lebanon has called to be privatized, are at risk.
“As Mr Bifani said, there are vultures standing on the sidelines, looking at this and waiting to see what kind of profits they can make out of it,” she said.
A generation of Lebanese will see their futures shattered, Rizk warns, unless rapid actions are taken to wrest decision-making from entrenched and unchangeable elites.