Barbados’ National Insurance Scheme (NIS), and especially the use of its funds by Government, has generated increased discussion in recent years.
As the economic recession has dragged on, some observers have voiced fears that the state’s heavy reliance on this source of financing will have negative impacts in future years.
The NIS was established in June 1967 as Barbados became one of the regional pioneers in social security protection. Since then the entity has been a consistently reliable source of benefits – including pension, medical and unemployment – for thousands of Barbadians.
However, there are concerns that this might be under threat. One of those voicing this fear consistently is outspoken chairman of the Barbados Entrepreneurship Foundation, Peter Boos, who has called the successive Barbados administrations’ use of NIS funds “abuse”.
“The NIS fund’s own guidelines for asset diversification are in serious breach, with loans to Government accounting for somewhere around 70 per cent of the investment portfolio. It is highly improbable, in my view, that Government would be able to repay the debt on normal commercial terms. NIS debt restructuring is inevitable…,” he said.
Boos also found it unacceptable that NIS audited financial statements had not been produced for many years.
“Had this occurred in a financial institution in the private sector, the consequences would be immediate and severe. They would withdraw the licence.”
Representatives from the Institute of Chartered Accountants of Barbados (ICAB) voiced similar concerns recently.
“We’ve made recommendations about timely publication of audited financial statements, timely publication of the actuarial report on the fund, the constitution of the board of the NIS and the manner in which the chairman of the board of the NIS is selected,” ICAB vice-president Andrew Brathwaite said.
“So we do share the concerns about the stability of the National Insurance [Scheme], especially looking 20 or 30 years into the future.”
In contrast, Minister of Finance and Economic Affairs Chris Sinckler recently maintained that the NIS was sound and that Government was not using it like a “lucky dip”.
“I heard that Government is dipping into the NIS as though the NIS is some kind of lucky dip. That is not the truth. The truth is that the NIS does a very hard negotiating with Government and quite often the Government pays higher rates in borrowing from the NIS than it gets elsewhere in the open market,” he said.
“And we do it because we know it’s the workers’ fund, we know that it goes eventually to support those persons who have contributed to society and continue to contribute to society. So our goal is to ensure that the NIS is never in trouble, but to ensure that it is in fact as viable as humanly possible in the circumstances.”
In the latest NIS actuarial review – the 14th conducted by Derek Osborne, chief actuary of the Bahamas company Horizonow Consultants Limited. It states: “While total expenditure now exceeds contributions and no contribution rate increase is anticipated, deficits are not expected before the next 25 years and there are significant reserves to sustain payments for the medium term.”
