Future cash bailout in the cards for NIS – VP Jagdeo

…as contributions too low to cover payouts

The Government will at some point in the future have to make a cash injection into the National Insurance Scheme (NIS), which is currently faced with a situation whereby there aren’t enough contributions to cover benefit payouts.

During a recent press conference, Vice President Bharrat Jagdeo spoke about the National Insurance Scheme and its financial problems. According to him, the Government will at some point have to intervene and give NIS a cash bailout.
“You know we now have to fix the NIS, because the contributions can’t in the long run when we did the actuarial study, the contribution can’t sustain the benefits. And that is why in the future we have to make a large cash injection into the NIS,” Jagdeo said.
Jagdeo further explained that the reason for NIS’ current state has nothing to do with the Berbice Bridge and the scheme having to repay investors. He noted that even now, the Berbice Bridge investors have not yet received a cent in dividends.
“I sat here, right here and explained to you the structure of the financing and how the people who put equity in the bridge, they haven’t received a cent of dividend as yet. But the debt financing, which is what NIS put in and the equity and the preferential shares and the subordinate debt, they’re getting an 11 per cent return. And NIS has already gotten over $3 billion in returns. This is their most lucrative investment. I gave you numbers here, which you can verify,” Jagdeo said.
Back in 2006, NIS made a $2.5 billion investment into the Berbice Bridge that was being constructed. NIS went on to earn $2 billion in interest and payments for preference shares, and another $1.3 billion from its principal investment.
According to the breakdown Jagdeo had provided, NIS invested $300 million in Bond One at nine per cent; $760 million in Bond Two at a 10 per cent rate; $500 million in subordinated debt at 11 per cent; $950 in preference shares, and $80 million in common shares.
As a result of these investments, to date, $300 million was repaid in full on Bond One along with $276 million in interest; and for Bond Two, $995 million was received in interests alone by the NIS.
With regards to the subordinate debt, which is ongoing, $65 million has been redeemed so far and $517 million in interest was received; and $268 million was paid to NIS on the preference shares, while no returns were paid for the $80 million common shares.
Despite this, NIS has been operating in deficits for the past five years. Currently, the scheme does not have enough contributions to cover benefit payouts. This is after the former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government would have received a surplus entity when it took office in 2015.
That year, NIS had an operating surplus of $968 million and $168 million the following year.
However, in 2017, things started to spiral at the entity with a deficit of $175 million recorded that year; $1.6 billion deficit in 2018, $1 billion deficit in 2019, $1.7 billion in 2020 and $2.8 billion deficit in 2021.
But Jagdeo had explained that the operating deficit trend over the last two years was largely due to low contributions as a result of the COVID-19 pandemic during which job losses were at an all-time high.