NIS gets $5.6B ‘lifeline’ as Govt pays off CLICO debt

…a sad day for taxpayers but no use crying over spilt milk – Jordan

The cash-strapped National Insurance Scheme (NIS) was on Friday handed a 20-year ‘lifeline’ when Government inked an agreement to hand over almost $6 billion, monies NIS would have invested in the Colonial Life Insurance Company Limited (CLICO) – an investment that became impaired when CLICO (Guyana) was ordered liquidated back in 2009.

Finance Minister, Winston Jordan inked the Debenture agreement in the presence of NIS General Manager, Doreen Nelson, CLICO Liquidator, Bank of Guyana Governor Dr Gobin Ganga and the Finance Ministry’s Debt Management Director Donna Yearwood, among a host of other stakeholders.

The ceremony was held at the Finance Ministry, Main Street, Georgetown and would see the impaired monies being repaid to NIS over a 20-year period, with the first tranche of just over $317 million to be made payable in January 2017.

Approval was granted for government to make payments to the NIS through the issuance of 20 Non-negotiable Debentures, to be redeemed annually over 20 years, at a fixed interest rate of 1.5 per cent.

Timely intervention

NIS General Manager Doreen Nelson in welcoming the intervention by the administration, pointed to the cash-strapped nature of NIS:

“(It is) certainly good to finally have this matter out of suspension and a decision taken in terms of the guarantee made some years ago…I am sure that you are aware of where we are financially.”

She was at the time referencing a Parliamentary resolution, in tandem with a commitment by the then People’s Progressive Party/Civic (PPP/C) Administration under former President Bharrat Jagdeo, that all of the CLICO liabilities will be paid off.

NIS over the years would have also been experiencing a situation where its annual expenses began outstripping its revenue – a situation compounded by the billions it had impaired in CLICO for a number of years.

Nelson told those in attendance, including the media, “we find that this is a timely intervention” and pointed to the company’s upcoming actuarial review which is expected to make further recommendations on restructuring the company.

Speaking on behalf of Government, Finance Minister Jordan said the impaired investment has had a traumatic effect on the operations of NIS.

He denied that Government was giving NIS a loan, as had been reported in other sections of the media.

In seeking to offer clarity, Jordan said, “what we are seeking to do is to give NIS, as most as possible, what they invested in CLICO over a period (to now be re-paid over a period of 20 years).”

According to Minister Jordan were government in future to recover anything from CLICO with regards the NIS investments, those monies would be placed in the Consolidated Fund.

Sad day

Jordan quipped too that while it was a happy day for NIS, it is indeed “a sad for the taxpayer of Guyana because it is the taxpayer who have to bear these sets of payments over the next 20 years…

In excess of $5.89 billion is gonna be diverted to meet these payments, so just consider what that kind of money could have done for other areas, be it wages or infrastructure or other running costs of the government.”

Nonetheless, Minister Jordan is of the opinion that it’s “no use crying over spilt milk at the moment.”

Meanwhile, CLICO liquidator Dr Ganga in providing an update on the payments being made to its policyholders, said while a significant amount has been recovered and paid over, the company still had weighty liabilities to honour – almost $6 billion.

According to Dr Ganga, as of the end of July last, CLICO would have made total payments to the tune of $6.7 billion to a number of policy holders, related parties and organisations.

He did seek to point out that while 8882 cheques would have been uplifted and processed to the tune of $6.7 billion, there are still 2881 cheques for persons yet to uplift. This outstanding amount, according to Dr Ganga, amounts to in excess of $130 million.

According to the CLICO liquidator, the company still has debts to repay including to NIS to the tune of $5.9 billion.

Speaking directly to the NIS repayments and an outstanding $4.9 billion, Dr Ganga was quick to point out that this will not be taken off the books, since CLICO is still exploring options to recover its monies.

He said too that another Government organisation – the Guyana Forestry Commission – is also owed another $240 million, “so we are hoping that we will have enough assets for sale to pay the “organisations, related parties and others, fully what is owed to them, except NIS.”