According to Lebanon’s Ministry of Finance (MoF), personnel costs increased annually by 0.7% to reach $5.48B at the official rate of 1507.5 LBP per USD, by October 2021, compared to $5.44B during same period of 2020.
The increase in personnel cost was driven by the rise in the payments related to retirement compensations by 11.1% or $175.128M to stand at $1.74B. In contrast, the end of service indemnities dropped by 28% to reach $184.41M by October 2021 while transfers to public institutions to cover salaries declined by 14.4% to stand at $220.23M by the same period. In the same token, salaries, wages and social benefits decreased by 0.8% to reach $3.33B by October 2021.
Interesting to note, 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 more details, payments for the sub-account of “salaries, wages, and related benefits” constituted 41% of the primary spending breakdown, and decreased by $26.53M to reach $3.33B by October 2021.This decline was mainly attributed to the drop in total “Allowances” by 2.8% as those paid to the Army and the Internal Security Forces decreased by $44.44M and $13.26M, respectively.
Overall, personnel costs represented 76.6% of current primary expenditures and 56.2% of total expenditures by October 2021, compared to 72.3% and 50.5% by October 2020. The reason for the changes in the personnel cost lies in the substantial changes in the expenditure base registering considerable yearly drops of 19.6% and 9.4% by October 2020 and October 2021, respectively. It is important to highlight the fact that personnel staff represents the main bulk of the government’s expenses, and any future adjustment for public sector’ salaries will inflate the personnel cost and pose huge burden on the State pushing it towards more of wasting public funds.
Personnel cost breakdown by component in Jan-Oct 2019, Jan-Oct 2020 and Jan-Oct 2021 (Billion LBP)
Source: Ministry of Finance, Directorate General of Finance