According to Lebanon’s Ministry of Finance (MoF), personnel costs decreased annually 7.2% to reach $2.04B at the official rate 1507.5.
The decrease in public salaries was driven by the large drop of “end of service indemnities” by 22.9% reaching a total of $82.25M during the first four months 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 18.3% equal to $17.91M to reach $80.92M by the same period. However, “Retirement compensations” payments rose slightly by 2.4% to $639.469M in April 2021 compared same period past year.
In more details, payments for the sub-account of “salaries, wages, and related benefits” (constituting 37% of the total primary spending) significantly decreased by 9.43% year-on-year (y-o-y) to reach $1.24B by April 2021. This decline was mainly attributed to the decrease of all sub-components. “Allowances” contracted by 36.8%, while “salaries and wages” slightly dropped by 0.2%, whereas in “employment benefits” declined by $11.27M.
Overall, personnel costs represented 71.7% of current primary expenditures and 51.5% of total expenditures by April 2021, compared to 67.7% and 45% by April 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 19% during Jan-Apr 2021 compared to Jan-Apr 2020. Interesting to note that there are discussions going on currently that would supplement monthly salaries by half a salary each month (but not part of the basic) for a year so as to help public employees’ purchasing power. If approved, this could increase personnel cost by LBP 350B each month.
Personnel Cost by April
