According to Lebanon’s Ministry of Finance (MoF), personnel costs increased annually by 1.8% to reach $6.04B at the official rate of 1507.5 LBP per USD, by November 2021, compared to $5.93B during same period of 2020.
The increase in personnel cost was mainly driven by the rise in the payments related to retirement compensations by 10.2% or $177.11M to stand at $1.9B along with a less pronounced rise in salaries, wages and social benefits by 0.3% or $12.6M to stand at $3.67B by November 2021. In contrast, the end of service indemnities dropped by 23.2% to reach $202.3M by November 2021 while transfers to public institutions to cover salaries declined by 8.1% to stand at $260.7M by the same period.
Interesting to note, the large drop of the end of service indemnities can be explained by the fact that employees were not motivated to get paid at the end of service due to the devaluation of Lebanese lira, as they were waiting for an upcoming potential salary correction.
In more details, payments for the sub-account of “salaries, wages, and related benefits” constituted 39.8% of the primary spending breakdown, and increased by $12.6M to reach $3.67B by November 2021, mainly attributed to the rise in total “Allowances” by 5.2% as allowances paid to the civilian and education personnel increased respectively by $43.78M and $21.23M, whereas payments to the military personnel decreased by $41.13M.
Overall, personnel costs represented 77% of the current primary expenditures and 55.6% of total expenditures by October 2021, compared to 72.3% and 51% 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 22.8% and 6.7% by November 2020 and November 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. In fact, the recent legislated increase in public wages and salaries by 300% will do just that and more.
Personnel cost breakdown by component in Jan-Nov 2019, Jan-Nov 2020 and Jan-Nov 2021 (Billion LBP)
Source: Ministry of Finance, Directorate General of Finance