Public Personnel Costs Up by 18.9% y-o-y to $2B by April 2018

According to Lebanon’s Ministry of Finance (MoF), personnel costs rose by an annual 18.9% to reach $2B by April 2018. In fact, the eminent growth in personnel costs was driven by the parliament’s ratification of “Law #46” attached to the passing of the new salary scale for public sector employees in July 2018. As a result, “Salaries, wages and related benefits”, “End of service indemnities” and “Retirement salaries payments” all witnessed yearly increase during the first 4 months of the year.

In details, payments for the sub-account of “Salaries, wages, and social benefits” (grasping 64.65% of the total personnel costs) rose by 12.9% year-on-year (y-o-y) to reach $1.32B by April 2018. This uptick may be attributed to the 26.8% y-o-y rise in the basic salaries of military personnel to stand at $659.4M by April 2018 noting that their allowances dropped by yearly 18.4% to reach $185M over the same period. Moreover, basic salaries to “Education personnel” as well as the “Civil personnel” recorded annual upticks of 25.6% and 51.3% to reach $221.6M and $117.4M, respectively.

In addition, payments for the sub-account of “Retirement salaries payments” (grasping 23.5% of the total personnel costs) rose by 16.4% year-on-year (y-o-y) to reach $478.9M by April 2018. As for “End of service indemnities” (7.3% of the total), it recorded a significant yearly increase of 145.9% to reach $149.2M. The rise can be linked to the implementation of the new salary scale, which encouraged many public employees to undergo an early retirement plan.

Overall, Personnel costs constituted 64.8% of Current primary expenditures by April 2018, compared to 67.2% and 68.1%, respectively in the same periods of 2016 and 2017. However, Personnel costs represented 35.6% of total expenditures by April 2018, compared to 33.2% and 37.9% by April of 2016 and 2017, respectively. The share of personnel costs from total expenditures dropped largely due to a more pronounced rise in total expenditures. In fact, these least grew yearly by 26.4% compared to the same period of 2017.

The Lebanese government is currently working on strict austerity measures in the 2019 state budget in order to reduce the budget deficit. Among the things that could be discussed are the “benefits and end of services indemnities” to the public sector employees. Reducing the deficit-to-GDP ratio, (which reached 11% in 2018), by 1 percentage point every year over five years was one of the key pledges Lebanon made at the CEDRE conference in Paris last year.

Breakdown of Salaries, Wages and Related Benefits by April 2018 (in $M)

Source: MoF