According to Lebanon’s Ministry of Finance (MoF), personnel costs decreased annually 11% to reach $1.50BM on the official rate 1507.5 and $140.80M on the parallel rate (16,150 LBP/USD) on March 2021.
The decrease in public salaries was driven by the large drop of “end of service indemnities” by 64.7% reaching a total of $25.87M during the first quarter of 2021. The large drop of the end of service indemnities can be explained by the fact that employees are not encouraged to get payed the end of service due to the devaluation of Lebanese lira, as they are waiting for a potential salary correction in the near future. Moreover, transfers to public institutions to cover salaries decreased by 26.5% equal to $19.23M to reach $53.73M by the same period. However, “Retirement compensations” payments rose slightly by 2.3% to $978.94M in March 2021 compared same period past year.
In more details, payments for the sub-account of “salaries, wages, and related benefits” (constituting 36.7% of the total primary spending) significantly decreased by 12.09% year-on-year (y-o-y) to reach $949.91M by March 2021. This decline was mainly attributed to the decrease of all sub-components. “Allowances” contracted by 38.3%, while “salaries and wages” dropped by 2.3%, followed by a decline in “other payments” and “employment benefits” by $15.25M and $11.94M, respectively.
Overall, personnel costs represented 68.6% of current primary expenditures and 48.8% of total expenditures by March 2021, compared to 65.9% and 43.7% by March 2020. The key reason for this significant change in the share of personnel cost as shares of total expenditures lies in substantial changes in the expenditure base registering a considerable y-o-y rise of 9.5% during March 2020, followed by a large decrease of 20.4% during March 2021.
Personnel Cost Breakdown by March (in $M)
Source: MoF, Directorate General of Finance, BLOMINVEST