Consultations begin as NIS seeks sustainable financing strategies
Guyana Chronicle
June 21, 2004
GINA -- THE Board of the National Insurance Scheme (NIS) has begun consultations with other stakeholders on strategies to ensure the scheme's sustainability in the future.
That’s according to NIS Board Chairman and Cabinet Secretary Dr. Roger Luncheon.
On June 9, Dr. Luncheon disclosed that the NIS would have to choose a path that would see contributors being asked to pay higher contribution rates or have benefits slashed, following the findings of the report of the 6th Actuarial Review of the Scheme.
The Actuarial review covers the period of operation for 1999 - 2001. Among the key factors identified was the ageing of the population leading to unfavourable contributor/pensioner ratios.
When asked at a news briefing Thursday if the NIS had made any decision on the way ahead, Dr. Luncheon said there was a procedure that would entail the NIS Board sharing the actuarial report with the three stakeholders -- Government represented by Ministry of Finance, the Private Sector and the Trade Union Movement.
The views gathered from the stakeholders' engagements, both collectively and individually, will be presented to the Board for action to be taken.
"One of the main recommendations to sustain the scheme is to raise the contribution rates as outlined in the 2004 Budget Speech by Minister of Finance Sasenarine Kowlessar," he said.
Dr. Luncheon noted that the process of consultation with the stakeholders has started. However, he pointed out that because of the magnitude of the problem, the consultations may very well expand to include other stakeholders such as pensioners and consumers.
Once this process is completed, the report will be taken to Cabinet and eventually Parliament for final decision making.
The NIS was formed in 1969 and over a period the ratio was four contributors to one pensioner. According to the report, this can deteriorate in the future to one contributor to five pensioners. The report will now be examined by the stakeholders, then it will be made public.
When asked if the Scheme's investments and loans to Government and the Private Sector are contributory factors to its bleak financial outlook, Dr. Luncheon replied in the negative.
During 1999 – 2001 NIS granted loans to Courts Guyana ($500M) and Government for the CARICOM Headquarters (US$4M). Dr. Luncheon noted the statutes governing the operations of the fund call for extremely safe loans and places the Consolidated Fund as responsible for addressing shortfall or liquidity problems.
For this reason, he explained, there is some degree of ‘conservatism' in the way the investment fund is handled. According to the Chairman of the NIS Board, most of the loans issued by the facility have matured and investment fund has about $22B. He noted that bulk of the Scheme's fund is invested in Treasury Bills.