Lebanon’s Public Sector: The anatomy of a broken system

Lebanon’s financial collapse did more than wipe out bank deposits. It exposed a deeply imbalanced fiscal structure: a state that employs hundreds of thousands, rents its own ministries at premium prices, recruits without strategic planning, and allows billions to leak through porous borders. Meanwhile, taxation falls disproportionately on those without political protection or financial escape routes.

Lebanon is often described as a “failed” or “absent” state. The reality is more paradoxical. The state is omnipresent except where governance is most needed.

The first red flag is statistical opacity. “There is no exact figure for the number of public sector employees,” says Nassib Ghobril, chief economist at Byblos Bank.

Estimates range between 300,000 and 350,000 employees and retirees. “Roughly 300,000 between active workers and pensioners,” he notes.

In a country with an estimated labor force of around 1.2 million, this means roughly one in three economically active Lebanese depends directly on the public sector.

For an economy marked by weak growth, low productivity and fragile public finances, that ratio is striking. Ghobril is unequivocal: “For an economy the size of Lebanon’s, public employment should not exceed 100,000 to 150,000 at most.”

Lebanon is operating at roughly double what many economists would consider sustainable.

$6.4bn in 2019, more than debt servicing

The imbalance becomes clearer when examining pre-crisis data.

“In 2019, public sector salaries and pensions reached exactly $6.4bn,” Ghobril recalls.

That figure, $6.4bn in a single year, exceeded Lebanon’s debt servicing obligations at the time.

In other words, the state was spending more on paying its workforce than on servicing its sovereign debt.

Even today, public sector wages account for around 55 per cent of projected public expenditure in the 2026 budget. In 2024, they approached 60 per cent.

The budget is effectively captive. Fiscal flexibility is minimal. Structural reform space is narrow.

31,000 recruits in four years

Between 2014 and 2018, 31,000 individuals were hired into the public sector.

“Thirty-one thousand people,” Ghobril emphasises. “Most of them do not have a clear job description and do not really have work to perform.”

The expansion occurred largely without strategic workforce planning and, critics argue, was often politically motivated.

A 2018 World Bank study estimated a surplus of 15,000 employees in public education alone. Additional hiring occurred when the state assumed management of mobile telecom operators. “Hundreds of people were recruited, including individuals without real tasks,” Ghobril says.

More recently, the cabinet considered hiring 90 employees for the railway department in a country where rail transport is effectively non-existent.

The symbolism is difficult to ignore.

At Least 25,000 “Ghost Employees”

The issue extends beyond overstaffing to payroll integrity. “We know there are at least 25,000 ghost jobs in the public sector, if not more,” Ghobril states.

He clarifies that many civil servants are productive. “But there are also people who do nothing and receive salaries.”

His conclusion is direct: “This surplus must be corrected so that salaries are allocated to productive employees who deserve increases.”

The fiscal question is therefore not merely about size but about efficiency and allocation.

90 public entities without purpose

Since 2017, parliamentary economic committees and the Ministry of Finance have acknowledged the existence of at least 90 public institutions, agencies and funds that no longer serve a clear function.

They were expected to be closed or merged. No meaningful restructuring followed.

“There are at least two ministries that should be eliminated,” Ghobril argues, citing the Ministry of Displaced Persons and the Ministry of Information, which he describes as obsolete.

He notes that the Minister of Displaced Persons reportedly requested $30m to close his own ministry, a paradox emblematic of Lebanon’s administrative logic.

$135m a year in rent

Beyond payroll costs, the state incurs substantial property expenses. Lebanon spends approximately $135m annually renting buildings to house ministries and public administrations. In 2025, 1,500bn Lebanese pounds were allocated to rental-related expenditures. A state burdened by structural deficits does not own much of its administrative infrastructure. It leases it.

Porous borders, selective taxation

While expenditure remains elevated, revenue collection has weakened dramatically. According to the IMF, total public revenues fell from 21 per cent of GDP to 6.3 per cent in 2022.

Losses linked to import under-invoicing have been estimated at 4.8 per cent of GDP.

However, when enforcement strengthens, revenues respond. Customs receipts rose from $1.678bn in 2024 to $2.274bn in 2025 a 35.4 per cent increase.

The implication is straightforward: improved governance yields measurable fiscal gains.

Yet until leakages are addressed, the tax burden falls primarily on consumption and, by extension, on households particularly those without access to alternative financial channels.

“Yes, there is surplus employment in the public sector. Yes, there are at least 25,000 ghost jobs. And this costs taxpayers. It is a burden on the Lebanese economy,” Ghobril concludes.

A fiscal burden. A productivity burden. A credibility burden.

While the state finances inefficiencies, it struggles to fund essentials: judicial reform, infrastructure, public health and investment.

The existence of the problem is no longer in dispute. The question is how long the country can sustain it.