Lebanon's financial downfall: Finance Ministry's decades of mismanagement and its cost to the nation

Report by Lea Fayad, English adaptation by Yasmine Jaroudi 

The Finance Ministry, one of Lebanon's most critical government institutions, has been under intense scrutiny for years. 

Traditionally responsible for managing the national budget and ensuring fiscal stability, the ministry's performance has been mired in controversy, inefficiency, and questionable policies over the last three decades.  

Globally, finance ministries are tasked with preparing the national budget and collecting taxes. 

However, in Lebanon, this responsibility has been plagued by arbitrary figures, poor management, and rampant inefficiency. 

Missteps such as the 2017 pay scale adjustment, which nearly doubled the fiscal deficit in just one year—from $3.7 billion to $6.3 billion—highlight the severe consequences of poor financial planning. 
 
Former Finance Minister Ali Hassan Khalil assured the public that funds for the adjustment were secure, only to admit months later that the budget reserve was empty.  

Tax collection, another core duty of the ministry, has been woefully insufficient. The ministry collects a mere 15% of Lebanon's economic output in revenue, far below global standards. 

Smuggling and customs evasion alone deprive the state of over $800 million annually, according to the International Monetary Fund (IMF). These figures come from legal crossings only and do not even account for additional tax evasion or Lebanon's regressive tax policies, which fail to distinguish between the rich and the poor.  

When funds ran dry, the Finance Ministry turned to international aid and foreign borrowing. 

In 1993, Lebanon started accumulating debt in U.S. dollars, a currency the country cannot print. Today, Lebanon ranks third among the highest in the world in terms of debt-to-GDP ratio. 

Khalil once assured the public that Lebanon was far from bankruptcy, yet a few months later, the nation spiraled into its worst economic crisis. Depositors lost over $70 billion in savings, the economy collapsed, the nation became isolated with the reputation of its people disrepute, and thousands of Lebanese fled the country in search of better opportunities.  

Despite mounting evidence of failure, successive finance ministers and governments continued on the same path, offering no fundamental reforms or solutions. 

The Finance Ministry has long been seen as a treasure trove of mismanagement, dubbed by critics as a "modern-day Ali Baba's cave." 

While there have been isolated attempts at reform, they were never sufficient to address systemic issues. Even political confrontations, like those sparked by the Free Patriotic Movement (FPM) "Impossible Recovery" book, ultimately fizzled out in political compromises.  

Decades of mismanagement by finance ministers and successive governments have failed Lebanon's economy, its people, and its banking sector. 

The time has come for a complete overhaul of the Finance Ministry, with a new leadership capable of implementing real, transformative reforms to restore confidence and stabilize the country.