According to Lebanon’s Ministry of Finance (MoF), personnel costs decreased annually by 4.7% to reach $4.33B at the official rate of 1507.5 LBP per USD, in August 2021.
The decrease in public salaries was driven by the rise in the payments related to retirement compensations by 2.4% or $30.51M while salaries, wages and social benefits decreased by 5.8% or $157.21M on annual basis. Moreover, the end of service indemnities witnessed a decline of 35.2% or $62.35M and transfers to public institutions to cover salaries also dropped by 8.1% or 15.92M.
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 paid 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 39% of the primary spending breakdown, and dropped by 5.82% to reach $2.55B by August 2021.This decline was mainly attributed to the decrease of all sub-components. “Allowances” contracted by 30% as those paid to the Army and the Internal Security Forces decreased by $84.24M and $37.81M, respectively.
Overall, personnel costs represented 72.4% of current primary expenditures and 53.1% of total expenditures by August 2021, compared to 71.5% and 50% by August 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 18.5% for Jan-August 2021 compared to 10.4% same period last year.
Personnel cost breakdown by component in Jan-Aug 2019, Jan-Aug 2020 and Jan-Aug 2021 (Billion LBP)