Corruption is endemic in Lebanon’s political system, and the IMF can help change that

This blog is part of our series, Tracking the Trillions, which takes a closer look at how the International Monetary Fund (IMF) can tackle corruption, while promoting transparency and accountability.

The shock and horror at the devastation and loss of life caused by the explosion in Beirut has turned to anger as the facts of the disaster have emerged. No more so than in Lebanon itself where people – exasperated by political failures, economic collapse and endemic corruption – have taken to the streets to protest government corruption and demand justice.

Even before these terrible events spotlighted the role of corruption in undermined the institutions of state, the judiciary and politics, Lebanese people experienced corruption daily and recognised it as a major barrier to the country’s future development.

In Transparency International’s 2019 Global Corruption Barometer for the Middle East and North Africa, Lebanese people reported the highest perceptions and experiences of corruption of all the countries assessed. Eighty-nine per cent of people reported corruption in government as a big problem.

Equally damning, 68 per cent of people thought that most or all government officials are involved in corruption. This might explain why Lebanon scored a very poor 28/100 in the 2019 Corruption Perceptions Index, which measures public sector corruption.

As Lebanon rebuilds, we need transparency and accountability for the loss of life and destruction, including rigorous oversight of the huge sums of money for Beirut’s reconstruction, estimated at US$15 billion.

Even before the explosion, the International Monetary Fund (IMF) and Lebanon were discussing reforms necessary to re-establish macroeconomic stability with significant scope to strengthen the transparency and accountability of economic policies and public sector entities prior to a potential loan.

By insisting on adherence to international standards when it comes to anti-corruption measures on loans intended to support the economy, the IMF can make a real difference.

The IMF’s 2019 Article IV Report made recommendations on areas that require urgent improvement to strengthen anti-corruption systems. More recently the IMF’s Managing Director, Kristalina Georgieva, stressed the need for greater transparency and accountability in the response to the current crisis. The IMF can help ensure these critical reforms are implemented as part of any loan agreement.

To reduce corruption, Lebanon must enact illicit enrichment and asset declaration legislation. An amendment of the illicit enrichment law exists but has not been approved by parliament, and currently it does not require assets to be publically disclosed.

Declarations of assets, interests and incomes must be made public by law, and sanctions should be imposed for non-disclosure and for providing false or incomplete information.

In April 2020, the law on “Fighting corruption in the public sector and the establishment of the national anti-corruption commission” was approved. Yet the Commission is still to be established and has not even been included in government budgets.

To do its job, the Anti-Corruption Commission needs extra-territorial investigative prerogatives. Commission members should undergo background checks and should not have direct political affiliations, including legal representation of any political party or politician, employment or consultancy contracts, or volunteering. It should be mandatory for half of the Commission’s members to be replaced every three years.

The judiciary’s commitment to prosecuting corruption cases appears to have increased, especially after the protests of October 2019. However, there is little progress and two draft laws on judicial independence have not been passed. While the access to information law allows people to access and view legal information and documents, in practice court decisions are not made public.

Progress requires investigation and prosecution processes to be completed within a reasonable period, so as not to become open ended without reaching a conclusion. Court decisions must be published.

Knowing the identity of those who own a company is critical for managing corruption risks. Lebanon has a legal definition of beneficial ownership but no centralised register or other source that includes data on beneficial ownership. Where information does exist, it’s not possible to verify it.

Beneficial Ownership information should be gathered in a centralised register, it should be published and it should be verified.

Addressing Lebanon’s state-owned enterprises, the IMF’s Managing Director recently called for “transparency, and accountability – with comprehensive audits of key institutions, including the central bank”. Reforms are long overdue and must be in line with international best practices.

At a minimum, this means applying good governance with a balanced board of directors, including independents, and a rigorous and transparent process for appointment directors. It requires up-to-date, online, public registers of conflicts of interest of directors, senior executives and those in critical decision making or other sensitive positions. Decisions on contracting and significant asset transactions need to be transparent to counter corruption.

We stand at a crossroads in our nation’s history. The IMF can make a huge difference in Lebanon’s efforts to end corruption, and has already identified the steps needed to improve transparency and accountability. This unique opportunity for the IMF not only to show its commitment to the anti-corruption agenda, but to show solidarity with the people of Lebanon who are demanding change, cannot be wasted.