NIS in $748.4M half year deficit

– loss of more than 20,000 jobs major contributing factor

As a result of more than 20,000 persons from various sectors including the sugar industry losing their jobs, the Finance Ministry’s Half Year report revealed that the National Insurance Scheme (NIS) is in a worsening position, as its multimillion-dollar deficit continues to grow while revenue collection increases.

According to the report. NIS recorded an overall deficit of $748.4 Million for the year, compared to the $715.6 Million it recorded in the same half year period for 2018. Revenue collection so far for 2019 was $11.9 Billion, 9.7 per cent more than the same period for 2018.
“This improved position resulted from higher wage bands, on account of an increase in wages and salaries, as well as improved collection of outstanding contributions from delinquent employers,” the report says.

At the same time, however, NIS continues to struggle with collecting contributions from the self-employed persons. Some $492 Million was collected from the self-employed. According to the report, this is 22 per cent lower than the half-year target of $627.8 million, despite ongoing campaigns.
According to the report, NIS is working closely with the Guyana Revenue Authority (GRA) to update its database of self-employed persons. And as of June 15, 2019, self-employed persons can pay their contributions using Guyana Telephone and Telegraph (GTT) Mobile Money.”
As fast as money has been coming in, the scheme has also had to keep up with the payment of claims. According to the report, expenditure for the period under review increased to $12.6 billion, from $11.5 billion at the end of June 2018, mainly due to an increase in benefit payments. The report notes that these payments were 91.4 percent of total expenditure.
“The latest forecast projects a deficit of $546.7 million, a worsening position from a budgeted surplus of $469.3 million. This was mainly due to a shortfall of $1 billion or 4.5 percent in employee contributions, compared to the amount budgeted for at the half-year, as well as an increase of $449.3 million, or 1.9 percent in benefit payments,” the report says.

Cause and effect

Since the dismissal of thousands of sugar workers, late payment of their severance and the firing of about 2000 Amerindian Community Support Officers (CSOs), financial analysts have highlighted their concerns about the financial status of NIS.
Earlier this year, Chartered Accountant Christopher Ram, in an interview with Guyana Times on Guyana’s unemployment rate, had explained that this may impact payments to NIS and income tax.
According to the accountant, many persons do not see their NIS deduction in the positive light of being a contribution to their future pension, but rather they see it as a deduction from an already small salary.
Tax collection is not the only thing taking a hit when there is large-scale unemployment, as NIS contributions are also affected. 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. Opposition Leader Bharrat Jagdeo had previously 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 at a press conference that the last actuarial report recommended that focus be placed on building the reserve 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.
“What has happened since is that this Government has fired 7000 sugar workers, [and] many others. Let’s say maybe 20,000 more have lost their jobs. Take of the 20,000, just take another 8000 who were paying NIS, so those are people who are not contributing to NIS,” Jagdeo had explained.
This translates to decreased inflows for NIS and payouts that would remain constant or increase. In the last financial statement issued by the Scheme, it had showed a deficit of over $800 million.