With Government owing the National Insurance Scheme (NIS) in excess of $250 million in arrears through its statutory corporations, Minister of Finance Chris Sinckler has disclosed that he has been in discussion with officials of the scheme with the view of embarking on a bartering system in order to help clear that debt.
“[The debt is] coming down but it is high, and that, of course, jeopardizes the cash flow availability to the National Insurance Scheme. I believe the NIS has about $1.9 billion invested in Government papers,” said Sinckler as he led off debate on the National Insurance and Social Security Bill 2017 in Parliament on Tuesday.
The Minister of Finance said it was not a pleasant feeling for the Government to owe the fund, but said he was “sitting down” with NIS officials to determine the fund’s cash flow projections and needs “to determine how much of the outstanding amounts it will require in cash now, and then determine from the residual amount left, how much of that and where such amounts can be liquidated by giving of additional Government papers”.
“I am determined – and I have said to staff at the Ministry of Finance that is negotiating with the NIS on how to go about this – that we will secure resources to pay a substantial more portion of that in cash because, of course, the NIS invariably invests more so it pays us to pay them….
“One of the things we have to ensure [is] that starting from this financial year, all contributions to the NIS must be paid on time and in full. That is the instruction from my office . . . [to] our statutory corporations,” said Sinckler.
While not entirely dismissing critics that the fund was investing too much in Government paper, Sinckler said one of the challenges for the fund was the limited local investment that could offer “substantial” rates of return, though he said he wanted to see the fund investing in more local instruments.
At the same time, he said Government papers have been giving the NIS “substantial returns”.
“The rates of return, in some instances, on NIS real estate that is leased to Government, can exceed 10 per cent return on investment,” Sinckler pointed out.
Between 63 and 75 per cent of the NIS investment is traditionally invested in Government paper, he said, adding that the NIS currently has $222 million in investment overseas.
“I am not dismissing the people who say the National Insurance Scheme should not invest heavily in Government. I always make the point – I agree with you, I think the best thing for the Government of Barbados is to wean itself off the NIS because the amount of resources that we have to extend paying the NIS for these various things – the loans, the bonds, securities, the real estate – is substantially more than we would pay even if we had to go down in Broad Street and do so. But we do it because we are all invested in the social security scheme; we want it to do well and therefore we do this,” explained Sinckler.
He also pointed that for the NIS to invest more overseas it would mean using up more of the island’s foreign exchange, which was already struggling to stay above the 13 weeks benchmark.
“I think the NIS should invest a little bit more in private sector activities. . . .That is my view personally . . . I feel it should look for strategic areas in the Barbados economy which they can invest in, because to do so helps to expand economic activity, grow your economy, create greater employment and eventually create greater contributions to the fund,” the Finance Minister said.
He said one of the risks of the NIS investing in Government was that “however the Government goes, the investment goes” and therefore when Government experiences cash flow challenges, it is difficult to make its contributions, which has been the case in recent years.
In fact, Sinckler said he agreed that concerns expressed by the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) about the long-term viability of the scheme, were “legitimate”.
Late last year, the IMF cautioned that if the Fruendel Stuart administration and state-owned enterprises continued to pay the scheme late, it could face a shortfall in years to come.
Recent Local News
- Ministry launches investigation into death at senior citizens home
- Update - Police release the name of Vauxhall victim
- Police probe another unnatural death in St Lucy
- Family mourns for Mario Peters
- Update: Police investigate homicide at senior citizens home
- Police probe unnatural death in Christ Church
- GUYANA - Probe launched into death of cancer patients
- TRINIDAD - Gov't prepares legislation to treat with asylum seekers
- GUYANA - Legislator who brought down gov't may have committed treason
- GUYANA - Gov't maintains position regarding incident involving Venezuelan navy
- JAMAICA - Twenty murders in first week of 2019
- Caribbean islands record three earthquakes in 24 hours
- Mobile App