The NIS is protected against bankruptcy

May 02, 2022 Features / Columnists, Peeping Tom

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Kaieteur News – The National Insurance Scheme (NIS) is not facing bankruptcy. Nor are the benefits of contributors threatened.
Anyone familiar with the functioning of national insurance schemes would appreciate that provision is always made to secure contributors’ benefits. Unfortunately, this has never prevented persons from painting doomsday scenarios.
The NIS is secure because its liabilities are backed by the State. The Act establishing the NIS provides for the establishment of a Fund into which all contributions and interest from earnings and investment are deposited. It is out of this Fund that benefits are paid. However, the NIS Act also provides that in the event of the insufficiency of the assets of the Fund to meet the NIS’s liabilities, the shortfall will be met by sums allocated by the National Assembly.
There is therefore absolutely no possibility of the NIS Fund going bust because it has an iron-clad guarantee to be bailed out by the government. Those who are therefore raising alarm bells and demanding the government bail out the institution may therefore be unfamiliar with the fact that the Fund is secured by a guarantee under the law.
This is not to say that there are no problems with the Fund and its management. The Minister with responsibility for Finance in his Budget Speech this year announced that the long-term viability of the Fund was threatened.
And Second Vice President, Bharrat Jagdeo recently said that the NIS will be secured for the next 100 years. He has assured that if the government had to intervene it will and is required to do so.
Jagdeo has defended the returns on the investments made by the NIS in the Berbice River Bridge, his pet project. He has indicated that the NIS earned more than G$3B from both bonds and preference shares. But he has not said how much it earned in respect to its ordinary shares in the Bridge. A forensic audit undertaken by the APNU+AFC government had shown that from 2011 to 2014, there were no earnings from these ordinary shares.
Jagdeo was also strangely silent on the more than 5 million shares, estimated at some $5B which the NIS invested in CLICO. It is this investment, more than any other, which jeopardised the long-term future of the NIS. As at 2015, it was estimated that the Fund had lost more than G$2B in interest and principal payments.
NIS was however able to take ownership of the CLICO headquarters in Camp Street which, when it did, was valued at G$600M. It is now renting that structure to the Guyana Revenue Authority. GRA, however, is constructing a new headquarters and when its removes from the said Camp Street location, the NIS should place this building on the open market to see how best it can cut its losses.
The Berbice River Bridge is expected to be handed over to the government in 2027. The NIS should, during this period, be negotiating to sell its ordinary shares to the government even prior to then.
Rather than being critical of the PPP/C’s handling of the NIS, the APNU has to shoulder its fair share of blame for the problems confronting the Scheme. The NIS underperformed under the APNU+AFC, between 2015 and 2020, moving from an operating surplus of almost $1 billion to 1.7 billion in deficit. The APNU+AFC coalition, therefore, is in no position to be critical of the management of the affairs of the NIS.
The NIS problem is that its income is insufficient to meet its liabilities. Part of the problem is that contributions from employees are insufficient. Jagdeo tries to suggest that with some 7,000 sugar workers being terminated under the APNU+AFC that this has done terminal harm to NIS contributions. But GUYSUCO itself has been accused of owing the NIS large sums.
The problem boils down to the high level of informality in the Guyanese economy. There are far too many persons who are working and not contributing to the NIS. Some of them claim, with some justification, that given their advanced ages, it makes no sense for them to register with the NIS because they will never reach the 750 contributions needed to receive a pension, notwithstanding that the law requires all workers to pay NIS.
There are tens of thousands of self-employed persons who are not paying NIS. There are domestic and household workers in the homes of the rich and famous who are not being registered for NIS.
Some employers religiously deduct NIS contributions from their staff. But they do not pay these over.
The NIS has management problems. It always has. But its fundamental problem is that the high level of informality deprives it of much needed income in a country with an already relatively small workforce.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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