According to Lebanon’s Ministry of Finance (MoF), personnel costs decreased annually by 2.1% to reach $4.85B at the official rate of 1507.5 LBP per USD, in September 2021.
The decrease in personnel cost was driven by the rise in the payments related to retirement compensations by 7.3% or $103.48M while salaries, wages and social benefits decreased by 2.4% or $74.3M on annual basis. Moreover, the end of service indemnities witnessed a decline of 46.5% or $113.43M and transfers to public institutions to cover salaries also dropped by 8.2% or 18.57M.
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 39.7% of the primary spending breakdown, and dropped by $74.3M to reach $2.99B by September 2021.This decline was mainly attributed to the decrease of all sub-components “Allowances” by 10.5% as those paid to the Army and the Internal Security Forces decreased by $51.74M and $29. 19M, respectively.
Overall, personnel costs represented 74.9% of current primary expenditures and 54.3% of total expenditures by September 2021, compared to 72.8% and 51.4% by September 2020. As such, personnel staff represented the main bulk of government’s expenses, thus posing a huge burden on the government’s budget. We reflect that the Lebanese government was previously accused of hiring thousands of public servants under illegal classification, thus inflating personnel cost and wasting public funds.
Personnel cost breakdown by component in Jan-Sep 2019, Jan-Sep 2020 and Jan-Sep 2021 (Billion LBP)
Source: Ministry of Finance, Directorate General of Finance
By: Stephanie Aoun