According to Lebanon’s Ministry of Finance (MoF), personnel costs increased annually by 1.2% to reach $3.65B at the official rate 1507.5.
The increase in public salaries was driven by the large drop in the payments related to retirement compensations by 19.1% or $180.43M as well as in the salaries, wages and social benefits by 3.8% or $89.55M on annual basis. Moreover, the end of service indemnities witnessed a decline of 19.5% or $24.54M and transfers to public institutions to cover salaries also dropped by 11.4% or 27.19M.
Interesting to note that 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.
In details, payments for the sub-account of “salaries, wages, and related benefits” constituted 61.79% of the primary spending breakdown, and dropped by 3.82% to reach $2.25B by July 2021. This decline was mainly attributed to the decrease of all sub-components. “Allowances” contracted by 27.5% as those paid to the Army and the Internal Security Forces decreased by $68.98M and $33.83M, respectively.
Overall, personnel costs represented 72.4% of current primary expenditures and 52.7% of total expenditures by July 2021, compared to 70.1% and 47.4% by July 2020. The key reason for this change in the share of personnel cost lies in changes in the expenditure base registering y-o-y drops of 9% for Jan-Jul 2021 compared to 19.1% same period last year.
Personnel cost breakdown by component in Jan-Jun 2019, Jan-Jun 2020 and Jan-Jun 2021: