Carrington: National Insurance Scheme on unstable footing
Director of Finance and Economic Affairs and Director of the National Insurance Scheme, Ian Carrington, gave a sobering disclosure in regards to the arrears owed by government and statutory corporations to the Scheme.
Carrington’s comments were made during a breakfast meeting hosted by the Central Bank of Barbados (CBB) on Wednesday where it was announced that bondholders of government paper will receive reduced interest on their investment, in addition to having to wait longer to cash out. Governor of the CBB, Cleviston Haynes said the policy was necessary for government to restructure its debt and meet the targets set out in the Barbados Economic and Recovery Transformation (BERT) plan.
Carrington, in his remarks, said the NIS is a significant financial institution in the debt restructuring process with the NIS holding over $3 billion in government paper. He said the debt restructuring will be “painful for all parties involved”, both institutions and individuals.
On the positive side, Carrington noted, the debt restructuring will see government get a hold on its domestic debt and stop dipping into the NIS' purse for cash. He revealed that arrears owed by government to the NIS now stand at $461 million. He said this amount is a buildup of arrears from central government and statutory corporations not paying contributions or rent for the buildings they were occupying.
He said significant debt amounts owed, forced the NIS into a precarious situation of paying benefits to Barbadians out of its reserve fund.
“That forced the NIS into utilizing, much sooner than they had anticipated, their investment income to sustain the payment of benefits,” Carrington explained.
This took, on a monthly basis $17 million out of the NIS investment income.
With the debt restructuring, Carrington said the Scheme can now do what it was designed to and not take on the role of being government’s purse.
“In the last three years in particular, NIS has been asked to perform three roles, two of which it was not designed for. NIS is essentially a social safety net, it was being asked to perform the role of a fiscal safety net and a monetary safety net.
“This is essentially getting your house back in order and allowing NIS to do what it was designed to do, which is to look after the needs of the persons in Barbados when they are at their most vulnerable, which is when they are unemployed, sick or when they retire.”
Bondholders have been given a deadline of October 5 to accept the debt exchange offer.