According to Lebanon’s Ministry of Finance (MoF), personnel costs slightly increased annually by 0.1% to reach $6.56B at the official rate of 1507.5 LBP per USD, by December 2021, compared to $6.55B by the end of 2020.
The increase in personnel cost was mainly driven by a remarkable annual increase in the payments related to retirement compensations by 9.6% or $182.42M to stand at $2.07B. Meanwhile, salaries, wages and social benefits dropped by 2.6% or $104.14M to reach $396.68M while end of service indemnities decreased by 18.6% or $52.40M to $230.84M and transfers to public institutions to cover salaries declined by 6.4% to reach $289.88M by end of December 2021.
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.
Moreover, the sub-account of “salaries, wages, and related benefits” constituted of 39.2% as a share of total primary spending. In more details, salaries and wages recorded a huge drop in total payments by 0.4% or $11.94M as those paid to the education and civilian personnel decreased by 1.7% and 3.1%, respectively. In parallel, the amounts paid to the internal security forces and the Army increased by $7.96M and $4.64M, respectively. In fact, salaries and wages constituted 76.7% of total payments for salaries, wages, and related benefits to public sector employees by December 2021, followed by allowances which had a stake of 12.5% and employment benefits which grasped 3.4% of total payments for salaries, wages, and related benefits to public sector employees. Meanwhile, other payments and unclassified allowances represented the remaining shares of 7.5% of the total.
Overall, personnel costs represented 77.2% of the current primary expenditures and 54.8% of total expenditures by December 2021, compared to 72.1% and 50.9% by December 2020. The reason for the changes in the personnel cost lies in the substantial changes in the expenditure base registering considerable yearly drops of 23.8% and 7% by December 2020 and December 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 of 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 2019, 2020 and 2021 (Billion LBP)
Source: Ministry of Finance, Directorate General of Finance