As far back as 2016, the actuary review into the finances of the National Insurance Scheme (NIS) had warned that repeat deficits may bring its reserves to the brink of collapse.
Chartered accountants TSD Lall and Company said in the independent auditor’s assessment for the entity’s 2016 annual report, which was recently laid in the National Assembly, that the actuaries had warned that the reserves were in danger of running dry by 2021.
“Without further qualifying our opinion, we wish to emphasise that… the actuaries reported several matters of concern among which were that the present value of shortfall of the fund over the period 2012-2041 amounted to $340.1 billion and also that the cash flow deficits will continue … and reserves are expected to be exhausted in 2021,” the auditors wrote.
“When forming our opinion on the Scheme’s financial statements, we were not required and did not express an opinion as to the completeness or accuracy of the long-term liabilities, as this is determined by the Scheme’s actuaries.”
According to the report, the NIS fund had $32.6 billion at the beginning of the year. But with the income received amounting to $19.5 billion and expenses amounting to $19.7 billion, the fund had a deficit of $220 million.
“However, when other comprehensive income of $44 million was included, a deficit of $177 million resulted, which when subtracted from the fund at the beginning of the year amount to $32.4 billion.”
Providing a breakdown, the auditors stated that the Scheme has fixed assets valued at $2.6 billion and investments valued at $29.4 billion. In addition, its net current assets are valued at $386.2 million.
Concern has long been expressed that unemployment rates would have an adverse effect on NIS contributions. For instance, concern has been expressed that layoffs in the sugar belt could undermine the Scheme’s position.
This is particularly so if the Scheme were to pay unemployment benefits. At a previous press conference, Opposition Leader Bharrat Jagdeo had said that the idea of paying out these benefits did not take into account the current financial status of the Scheme and its ability to meet its current obligations.
He had noted that the last actuarial report recommended that focus be placed on building the reserves to avoid a deficit. In fact, it was disclosed in that report that the life of the Scheme should come to an end by 2022 unless strategic plans for revenue earnings and expansion of the investment portfolio were effectively implemented. Jagdeo also referenced the thousands of dismissed sugar workers.
Last October, the then Chairman of the Berbice Bridge Company Incorporated (BBCI), Dr Surendra Persaud, who is also the NIS Chairman, announced steep increases in tolls at the crossing. At the time Guyana Times was told that NIS, through its Chairman, was forced to push for the increase in tolls in order to protect its investment. NIS has majority voting rights on the BBCI Board of Directors.
NIS had invested in Bond One of the project – $300 million. The Scheme received (not principal payments) $270 million, a 90 per cent return on the investment.
NIS also invested in Bond Two, $760 million, and received $823 million in return. The company also invested $500 million for subordinate debt (loan stuck) $456 million and is now owed $207 million. Preference shares amounted to $950 million.
NIS was paid back $163 million and is owed $507 million. Some $80 million was invested in common shares with zero returns so far. At the time, this newspaper was told that monies invested were performing better than what was predicated in the concession agreement.