Putting meat on the skeleton of the state

Prospects are high for adoption of a budget

Walking through the center of Beirut, Nejmeh Square, to the steps leading up to the Lebanese Ministry of Finance (MoF) is even more eerie today than it was 19 years ago. Back then, Downtown was still riddled with brokenness – with scarred streets and uninhabitable buildings that showed the results of the years of conflict. Passing through the district evoked pity and a longing for reconstruction.

Traversing Downtown in January 2017 means wiggling in between concrete barriers while empty store windows stare back at you. The last international chain coffee shop in the area recently shut down, and all that the expensively restored buildings evoke are memories of restaurants and shops that thrived here in the more vibrant times of ten years ago.   

Up in the welcoming office of MoF Director General Alain Bifani however, there is some cheer and confidence. One of the most crucial issues for Lebanon’s future is the adoption of a state budget. “We stand a very good chance of having a budget this year. I think that everybody means business. It is clear that the political level is very aware of the importance of having a budget,” he says.

According to Bifani, the draft budget for 2017 was prepared in August of last year in line with the same schedule that the MoF follows every year and sent to the Council of Ministers by end of that month. In a normal year, the council would then send the budget as a draft law on to Parliament where it would be examined, debated and voted into law by end of the year – but normalcy in Lebanese politics has been quite the exception.

Budgeting for tomorrow

Bifani is therefore not troubled by the fact that the budget might not reach Parliament until late 2017, calling this “an acceptable delay”, especially when taking into account that the budget draft was prepared under the previous cabinet. “Now that we have a new government, the draft of course needs to be revisited, and my understanding is that it is going to follow a fast track, which means reviewing mostly at the level of the Council of Ministers, after which the [revised] draft will be sent to Parliament for discussions and approval. There will be arbitrage about many issues, the usual stuff, but altogether there is no doubt that we have momentum and I really hope that we will be able to build on that and finally get out of this very long period of unorthodox managing of public finances,” he tells Executive. 

The budget is one of the top concerns for advancing Lebanon to a future of greater stability, bankers and business leaders told Executive upon the appointment of President Michel Aoun in late 2016. Lebanese state budgets have generally over the years been bones of discontent. The last time that a budget was adopted by Parliament was in February 2006, when the 2005 budget was voted upon and passed. Since then, failures to adopt a budget had been associated by critics with a wide variety of issues, from political discrepancies to dysfunctional administrations and the need to complete national accounts for most of the years since the end of the Lebanese conflict over a quarter century ago.

When talk turns to the recent years and the sorry state of the area around Nejmeh Square, Bifani agrees that Beirut’s Central District has become a nightmare for the reputation of Lebanon, a hole in the tax base and a burden for the people who invested heavily into the reconstruction of the center’s business venues. But this is not the only heritage that weighs on the Ministry of Finance, in addressing still unsolved issues in the financial past, Bifani explains. “Of course there is the issue of closing the accounts from the beginning of the 1990s until now. This remains a valid issue, but nevertheless, it is better to have a budget while waiting for proper accounts to be finalized than not to have either.”

In his update regarding the progress of closing accounts for the years between 1993 and 2015, Bifani elaborates that of the 11 accounts worked on vertically by the MoF team, eight have been reconciled and reconstructed completely, up from four completed in late 2015 when Executive last interviewed the general director. A ninth account is currently being finalized. “Hopefully we will be done within a month. There remain two accounts of which the work is between 70 and 80 percent complete. We are really reaching the last phases,” Bifani says.

Reiterating that it was once considered mission impossible by international experts to complete this work, he insists that the effort’s most important aspect is not how many man hours were invested by MoF staffers. “I don’t have an accurate figure but it was huge. We mobilized civil servants from all our directorates. These people worked in dust, in humidity, in horrible places. They found enormous amounts of papers that were thrown [into storage indiscriminately]. You had 2012 [mixed] with 2001 with 1993 all thrown together. To reconstitute and classify this took an amazing amount of time,” he says.

Nor is the most important aspect the timescale of its implementation, Bifani emphasizes, under the often asked question of whether the MoF has finished this work yet. Instead, it  is the proper framework that he and his team are building. “That is not the point. We are building on [the reconstruction and reconciliation of the accounts], giving the republic the means and procedures for proper accounting; it is a base and a very important milestone and we have to do it properly,” he emphasizes.

Beyond the job of reconciling the creative fiscal history of Lebanese administrations with the reality of  sorting out records at various ministries, agencies, and municipalities, Bifani’s focus is on Lebanon’s ongoing budget process. This involves consultations with all 24 line ministries, the presidency of the Republic and the Council of Ministers as well as the agencies that are included in the budget, which according to him, means practically every entity in the public administration. “All together there are about 45 units that we need to integrate,” he says.

The draft process entails reviews and modifications by the Minister of Finance after which the budget proposal is sent to the Council of Ministers by the end of August. From there it enters as a draft law decree to Parliament. “What usually takes time [at Parliament] are discussions at the Budget and Finance Committee where the whole budget is scrutinized after the Council of Ministers has approved it. Then it goes to the plenary to be voted upon, ideally by end of the year,” Bifani explains.

Now that we have a new government, the draft [budget] of course needs to be revisited

Budget administration

On top of this regular process, the MoF has to incorporate new legislative decisions into the budget, such as implications of the rent law or parliamentary discussions over waiving municipal obligations to pay outstanding dues to solid waste removal companies. Asked about the issue and what amounts could be involved in having the payment responsibility taken by the treasury, Bifani says the problem resulted from a misguided redistribution practice that created huge liabilities and translated into massive distortions, but he would not provide an estimate for the amounts in question. “This is a story that started in 2002 and was very poorly managed. We as an administration have been raising [this issue] and been flagging it forever,” he says.

He adds that the ministers of finance in two recent administrations made significant progress in alleviating the problem by adjusting the percentages taken by the government from municipalities but declares that it still was not yet possible implement the solution, “which is to have municipalities themselves decide on what they can contract and what they cannot”.

His overall approach to the reality of getting decrees and laws implemented in Lebanon is reminiscent  of the Realpolitik paradigm that politics is the art of the possible. When people inquire as to why he would accept imperfect measures, or not insist on laws that cover all imaginable issues, for example, in legislation on oil and gas and the creation of a sovereign wealth fund for the management of revenues from this national asset, he says he accepted such legislation because “otherwise, it would not have passed at all. As long as we fight to the last moment, we are making this system better and better and have the best we can”.

On the question of Parliament’s readiness to examine the draft budget law after a long period without the chance to discuss state budgets, he declares that he is not worried about Lebanese parliamentarians and radiates confidence that it will all go “very smoothly”.

“Despite everything that people say, our parliamentarians are educated people. I know that the work will be done seriously in the [Budget and Finance] committee,” he says, citing evidence from prior debates over budgets in the committee even if these budgets in the end were not sent to the plenary. As to broad discussions in the plenary budget debates, which have been customary in earlier years, he describes this as reflection on the fact that the budget is “the translation into money of the government’s whole policy”.

“Thus it is normal that everything is raised during the budget [debate],” he concludes. “I am not worried about it. I think our Parliament has shown the ability to react very quickly to legislative texts and in a very efficient manner. And I have to tell you that while the finance part is our job at the ministry, we learn a lot from discussions at Parliament.”

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.