Private sector investments by the National Insurance Scheme (NIS) have not been spectacular, says a Government senator who revealed that the NIS even registered losses on some of those investments.
Senator Darcy Boyce made the revelation today in the Senate as the chamber debated the National Insurance and Social Security Amendment Bill 2018 against the backdrop of concerns about the level of NIS exposure to Government papers.
Boyce, the Minister of State in the Prime Minister’s Office and a former Deputy Governor of the Central Bank, said the evidence showed that state investments offered a much higher level of return and had proven over the years to be more secure than private sector investments.
“What are the alternatives to the NIS investing in Government paper? Do we have bonds issued by major private sector companies that may be rated grade A? No. Do we have some projects and proposals from private sector persons for investment . . . that have been proven, for example, land developments schemes? We have a few of those but there are only a few and they are at the early stage of speculation where the risk is highest,” Boyce told the Senate.
“I have not had any indication of where [the NIS] has made such private sector investments that they have gained particularly large amounts of money. Indeed, I recall that they have tended to make losses on those investments,” he added.
Boyce insisted that options on the local market were limited, with no private sector bonds, and few shares being traded on the stock market which tended to offer low returns.
He said certificates of deposits from commercial banks required a “very powerful magnifying glass” to see the interest they paid.
“If you do not invest in Government paper and earn 3.5 to four per cent on treasury bills and on debentures, seven or eight per cent, and five or six per cent on treasury notes, what would the [NIS] be earning otherwise?”
He cautioned that the NIS could not risk leaving its millions of dollars in contributions in bank accounts to earn virtually zero interest.
According to Boyce, while the NIS had invested overseas in the past, some had yielded reasonable returns while in other cases the social security scheme made very little from the its overseas investments.
He charged that at a time when Barbados’ foreign exchange reserves were limited, Government could not sanction the use of foreign currency earnings to speculate in markets of other countries when there were very important payments that required foreign exchange.
Minister of Finance Chris Sinckler yesterday announced that Government would clear over $200 million in arrears to the NIS by paying some of it in cash and the remainder in Government papers.