Latest update March 18th, 2024 12:59 AM
Oct 13, 2019 News
Chairman of the National Insurance Scheme (NIS) John Seeram revealed a dark but real tale as he addressed the General Assembly to mark the entity’s 50th Anniversary.
“I am cognizant of the challenges the NIS is facing to maintain its financial sustainability which is now a priority issue.”
Financial Sustainability, according to Korean Research Institute, is defined as a condition in which the financial system is not unstable.
However, Seeram indicated that it is a major challenge of the NIS to maintain a stable financial system. This clearly implies that NIS is at a risk of running out of money.
The Chairman said this issue is as a result of owed arrears and returns from investments. Firstly, he dealt with the problem of the arrears owed.
He said that by the end of August 2019, arrears owed by the Government, public entities, Private Entities, and the self employed have amounted to approximately $2.3B.
In order to deal with this, Seeram says that NIS is currently relooking its income portfolio with a view to collecting all its arrears contributions, some of which have been long outstanding.
Seeram added that during 2018 the management of NIS had installed a Debt Management Department which is now fully staffed.
The purpose of this Department is to collect all outstanding arrears which are very much vital to the financial sustainability of NIS.
The Chairman also highlighted that their investment portfolio has not been earning the rates
of return on some of its bonds and shares in keeping with global returns.
To remedy this, he says that NIS will have to consider purchasing more attractive bonds and shares which are being traded on the Global Stock Markets, as against renewing the terms of the securities.
To take this route which is highly recommended, approval will be needed from the relevant authorities.
Leaving the “biggest” problem for last Seeram said that in order to eradicate the risk of running out of money, NIS needs to be paid its returns from its investment income.
One such investment was the investment made in Berbice Bridge.
The Berbice River Bridge was built through a public-private partnership between former president Bharrat Jagdeo-led government and sections of the private sector.
During the National Assembly in the Year 2006, a Bill was passed and assented to by the then president Jagdeo to facilitate the arrangement of the deal.
NIS, along with the New Building Society (NBS), was made to heavily invest in the construction and the operation of the Bridge which has yielded little or no returns.
In the year 2017, the current Coalition Government – A Partnership for National Unity +Alliance For Change (APNU+AFC) undertook to pay NIS some $5B, which it was owed and so badly needed to sustain its operations.
According to a 2018 statement on NIS’s financial position, it was revealed that in its asset portfolio of $34B, NIS’s Investment Portfolio comprised of $29B or 87% of its asset portfolio.
The NIS Chairman highlighted that the income return on the investments in the year 2017 was 3.7% which declined to 3.2% in the year 2018.
This, he implied, is because of an “unpaid investment income” of $810M at the end of 2018.
This investment income owed according to Seeram is an accumulated interest on a subordinated loan stock and preference shares due from the Berbice Bridge Company Inc. (BBCI).
The Chairman told the assembly that this accumulated interest is presently being addressed with that Company.
He also did not forget to mention that the decline experienced, indicates that this entire Portfolio needs to be addressed with a view of obtaining more lucrative returns.
Seeram also said that the NIS Board has so far approved the hiring of a consultant within the coming months to address the major priority area with regards to significant dollar investments.
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