The Unemployment Fund of the National Insurance Scheme (NIS) will need to be recapitalised to meet future demands, given the unusually high pressure placed on that fund in recent times.
Central Bank Governor Cleviston Haynes says this is critical, as he expressed hope there would not be a repeat of the demand on the fund like that of the last six months, during the COVID-19 pandemic.
Between March 23 and October 16 this year, the NIS paid out over $123.2 million in unemployment benefits to more than 32 003 unemployment claims.
For all of 2019, the scheme paid out only $49 million in unemployment claims, up from the $38.1 million it paid for the whole of 2018 and $32.8 million for the entire 2017.
Responding to questions during his review of the economy for the nine months ending September, Haynes said while the NIS overall has always been a “cash-rich institution”, the high unemployment rate in recent times has created somewhat of a “mismatch” since the Unemployment Fund did not usually carry substantial amount of assets.
“What is going to have to happen, because we obviously had to take care of those persons who were impacted by the crisis to make sure they got their unemployment [benefits] as is committed, is that the Unemployment [Fund] is going to have to be recapitalised going forward,” said Haynes.
“So, that is part of the strategy that Government now has to develop, which is to recapitalise the Unemployment Fund to make sure it is able to deal with future demands on it.”
The unemployment rate was estimated to have reached close to 40 per cent up to July this year, due to the COVID-19 pandemic which resulted in the closure of several businesses and the grounding of the travel and tourism sector for several months.
“Hopefully, we won’t have demands like the spike we have had over the last few months, but I think the overall strength of the National Insurance will not be impaired because Government recognises that what it will have to do is to recapitalise the insurance as it goes forward,” the Central Bank Governor said.
At the end of March this year, it was estimated that the Unemployment Fund had only $19 million while the severance Payment Fund had some $145 million.
Haynes also spoke about some of the planned changes for the Central Bank, saying it was critical that the island’s premier financial institution adapt to the current circumstances and make necessary changes to become more efficient.
“Some of our processes have been with us for a long time and right now we are in the process of reviewing our processes to see how we can improve delivery of those services. One of the things that has come up during this crisis, for example, is to deal with our exchange control applications online. That is not something we would have done previously,” he explained.
“In the coming months, we anticipate rolling out a new application that will allow persons . . . to make their exchange control applications online and we will be able to interface with the commercial banks. We are still in the process of testing, but we believe in a few months that will be rolled out and up and running, and lend to efficiency”.
Haynes said there were other internal operations of the bank that officials were examining to improve information flow to enhance overall efficiency.
“It is a process. It is not something that we are going to be able to do overnight, but we are working on this to be able to make sure that we can deliver more services to our clientele on an online basis and speed up the process of transacting business with our clients,” he added. (MM)