According to Lebanon’s Ministry of Finance (MoF), personnel costs decreased by an annual 6.4% to reach $3.58B by July 2020 compared to the same period last year. This decrease is due to reduction in “End of service indemnities” by 64.6% during the first seven months of 2020 compared to 2019, which could be a result of retiree’s discouragement of collecting indemnities with increasing lower real values at times of galloping inflation. However, that reduction was mitigated by an increase in the payments related to salaries wages and social benefits by 2.2%, and public institutions transfers to cover salaries by 14.7%.
In details, payments for the sub-account of “Salaries, wages, and related benefits” (constituting 65% of the total personnel costs) rose by 2.23% year-on-year (y-o-y) to reach $2.33B by July 2020. This rise is mainly attributed to the y-o-y increase in “allowances for military personnel” by 21.32% to reach $371M by July 2020. This increase is explained by a rise in hospital expense, school indemnities, increase in sickness and maternity expense in the past two months. Moreover, the rise of allowance expenses is justified by the devaluation of Lebanese pound and the inflation that recorded an unprecedented level this year. However, basic salaries to “Military personnel” increased by 0.57% to reach $1,161M, but “Education personnel” recorded an annual decrease of 11.58% to reach $362.44M.
In addition, payments for the sub-account of “Retirement salaries payments” (grasping 26.22% of the total personnel costs) dropped by 6.5% year-on-year (y-o-y) to reach $937.73M by July 2020. As for “End of service indemnities” (3.87% total personal cost), it recorded as mentioned a significant yearly decrease by 64.6% to reach $138.39M by July 2020.
Personnel cost contributed to 73.2% of current primary expenditures (excluding interest payments) by July 2019 before dropping down to 70.1% by July 2020. In fact, current primary expenditures witnessed a lower decrease of 2.3% by July 2020 mainly due to the larger transfers to Higher council of relief reaching $148.27M as well as higher payments to Hospitals by $81M. However, Personnel Cost represented 47.4% as a share of Total expenditure by July 2020 from 41% in same period by July 2019. The reason behind this rise lies in a lower expenditure base with a 19.1% year-on-year drop by July 2020.
Annual Change in Personnel Cost Breakdown by Component by January-July 2020 (in $M)