The National Insurance Scheme’s (NIS) purchase of Government paper is not a bad investment.
Government Senator Darcy Boyce took that firm position today as he contributed to debate in the Senate on the 2015/2016 Estimates of Revenue and Expenditure.
He said while some criticized the NIS’ decision, “the National Insurance Board gets its highest rate of return, its highest interest earned from purchasing of Government paper”.
Boyce told the Upper Chamber that one alternative that had been advanced was for the NIS to invest in foreign bonds and foreign equity.
But he said if that was done, the NIS would be depriving Barbados of needed foreign exchange while financing the development of another country.
“The National Insurance Scheme will be doing so at a rate that is lower than what it earns in Barbados. Are we asking our National Insurance Scheme to take up the savings of Barbadians and take them to develop some other country? Is that what we are asking for? If they cannot buy Government bonds are there private securities available for them to buy? Very few in Barbados,” he said.
“So the alternative for them is either buy Government paper or leave the funds idle. If they leave the funds idle what do they do with the forecasts from investments to keep the Fund viable? The NIS needs to earn a certain return each year in order to build up the reserves to pay the pensions down the road,” Boyce insisted.