Barbadians are being assured there is no need to worry about the stability of the National Insurance Scheme (NIS).
Minister of Labour and Social Security Senator Dr Esther Byer-Suckoo said the social security programme would not come under pressure due to Government’s deteriorating financial position, which has led to the scheme’s increased investment in Government securities in recent times.
Questions have been raised about the financial health of regional social security schemes due to a number of factors, including widening fiscal deficit.
In its October 2016 economic review for the January to September 2016 period, the Central Bank of Barbados reported that the NIS had increased its investment in Government securities by $91 million.
Additionally, the International Monetary Fund recently raised fresh concerns that the social security schemes in the region could face increasing financial pressure in years to come due mainly to slow economic growth, increasing public debt levels since the onset of the 2008 global financial crisis, widening fiscal deficit, rising unemployment and unfavourable demographic trends.
It is expected that NIS expenditure on benefits could soon exceed income from contributions.
However, while Dr Byer-Suckoo said a detailed update on the state of the NIS and its ability to meet its obligations was yet to come, she dismissed any notion that the scheme was handing funds to Government, insisting the scheme was simply purchasing Government instruments.
“This notion that NIS pays the bills for Government, that the NIS provide funding for Government, is erroneous in that national insurance may lend money to Government at very high rates, national insurance doesn’t say, ‘here, you cannot afford it we will pay that bill’. National insurance may loan money to Government and national insurance is guaranteed in contract, a high return on investment when it lends money to Government,” the minister explained.
“So what does that mean down the line for national insurance and their liquidity and so on? They are not at risk. It ensures they are not at risk in ensuring that loan agreement provides them with a sufficient return [and] the Government of Barbados does not default on its loans. The Government of Barbados has a record of paying back all of its loans, including loans to the national insurance,” she assured.
However, she admitted that Government was sometimes late on its contribution to the scheme, although she said Government employees owed benefits do get those benefits “at the end of the day”.