Although he ruled out the possibility of any increase in National Insurance Scheme pensions and benefits in the near future, Vice President Bharrat Jagdeo yesterday assured contributors that their contributions are secured for the next 100 years.
“Government will and has to intervene through various provisions to ensure people receive their benefits…We will cure the deficit using whatever means, the consolidated fund or whatever are the means to direct contribution into the NIS, to ensure that for the next 100 years, its fine, and that people can receive their benefits,” Jagdeo yesterday said during a press conference.
His assurances come on the heels of reports in the media attributing comments to him declaring that the government-operated insurance scheme is bankrupt.
While at a community outreach in Region Five on Wednesday, a beneficiary asked whether it was possible that they would receive an increase. In response, Jagdeo said he could not commit to any increases. He also stated the dismissal of sugar workers by the APNU+AFC government further weakened the financial standing of the corporation.
Jagdeo’s statements had attracted criticism from the leading opposition APNU+AFC Coalition Member of Parliament Volda Lawrence, who in a statement issued on Thursday night said that it was his abuse of power during his tenure as president that led to the plundering of the NIS resources.
“By his actions, this caused the resources of NIS to be further depleted… it was this very Vice President, who despite the advice from the Board of Directors of the NIS, including Guyanese with experience in financing and investment, proceeded to invest the members’ monies in the Berbice River Bridge, the CLICO Insurance Scheme and Laparkan, among others,” Lawrence said in her statement.
Lawrence, who is touted to replace AFC’s Juretha Fernandes as Shadow Minister of Finance, argued that the investments made using NIS monies were done in bad faith.
“One must also not forget the CLICO fiasco again involving Mr. Jagdeo and the NIS funds whereby some 5 plus billion dollars was invested. And we all know the fiasco of CLICO which was placed under judicial management in 2009 and subsequently was liquidated in September 2010,” she said.
She further stated that it was only when her party took government in 2015, that the parliamentary resolution via the issuance of 20 non-negotiable Debentures, to be redeemed annually over 20 years at a fixed interest rate of 1.5 per cent was honoured.
“It was the combined opposition that passed a resolution for the Liabilities of NIS to CLICO to be paid off. There was a commitment by his administration to do so but it was never done,” she noted.
Lawrence went on to state that the opposition stands ready to throw their support behind government’s approach to utilising funds from the Natural Resources funds for the next five years to remedy the situation.
The recently sworn-in Member of Parliament posited that the approach her government will use should they return to power will be to utilize 1 per cent from the NRF revenues via an annual subvention in order to wipe out this deficit caused by “Mr. Jagdeo’s administration in the first place.”
In rebutting the criticism by Lawrence, Jagdeo yesterday said the financial records of NIS illustrates the scheme formally operating at a deficit since 2017. He stated that despite issues with the fund when his party was in government, it did not perform poorly as it did under the coalition led government.
Reading from a prepared document, Jagdeo gave an analysis on the performance of the fund between 2015 and 2020.
“We have here in 2015 it had an operating surplus of $968,783,000. In 2016, $161,025,000 that was an operating
surplus, it still had more money. In 2017, $175 million in deficit; in 2018, $1.6 billion in deficit; in 2019, $1 billion deficit; in 2020, $1.7 billion in deficit. So this is what has happened, you see it has moved from an operating surplus to what has turned into an a huge operating deficit… that is what I mean it was factual, I can substantiate this” Jagdeo told the press conference as he sought to justify his claims on the NIS being bankrupt.
Jagdeo while responding to questions, stated that the operating deficit at the NIS continued and moved from $1.8 billion to somewhere around $2.5 billion. However, he highlighted that the pandemic was a contributing factor to the increase.
“…in the pandemic it got worse. You know a lot of people were not making contributions so it increased from about $1.8 billion to $2.5 billion and the declined continued. That’s what we have to fix now,” Jagdeo said.
Berbice Bridge Performance
Lawrence in her statement stated that it was “Jagdeo who invested 2.5 billion dollars of NIS monies in Ordinary Shares in the Berbice River Bridge. He further invested another $810 million from the NIS resources into this bridge in order to cover the non-performing assets in this entity.”
Refuting her claim, Jagdeo pointed out that the scheme has raked in over $3.3 billion from the investment and said that it stands to receive billions more in the future.
“…How much in total have they received back after they investing about $2.6 billion in total? … They received 2 billion in interest in payment for their preference shares and about $1.2 billion $1.3 billion in principle repayment. So far, they have received $3.3 billion from a $2.5 billion investment,” Jagdeo underscored.
He noted that the investment is the highest yielding instrument, which yields more than the treasury bills, the NIS usually invested in. He stated that if they had continued to invest in treasury bills they would not have acquired such a return.
Providing a breakdown of the investment in the Berbice Bridge Company Inc, Jagdeo explained they could not invest $2.5 billion in common shares when that is valued $400 million. He took a jab at Lawrence, a certified accountant, by stating that she does not understand financial structuring.
From the first bond of $300 million, NIS generated $276 million in interest and has already been repaid its invested $300 million.
The Vice President stated that in the $760 million principal investment, NIS received $993 million in interest, a sum larger than the actual investment. For the subordinate debt, it was explained that the NIS received some $65 million to date and continues to receive interest on the investment.
In its preference shares of $517 million, $200 million has been received, while for the $80 million in common shares, the insurance body is yet to receive interest.
“This is the reality of the NIS investment. It was one of the best investments for the NIS…so to say that the bridge somehow cause this problem with the NIS it is a fallacy. It is a fallacy. Nowhere could they have gotten a 9%, 10%, 11% interest and don’t pay any taxes on their return,” Jagdeo disclosed as he presented analysis of the investment made during his leadership of the country.
In 2018, General Manager Holly Greaves had indicated that they will be re-examining their investment in the Berbice Bridge Company.
For years there have been poor returns on the investment and in 2016 the Scheme had said that while it recognised that something needed to be done, it had placed its faith in the three directors it had on the Bridge’s Board at the time as well as the terms of its contract with the entity.
The Scheme’s Finance Controller Jacqueline Scotland had said at that time that it had not yet been paid dividends on the $80 million worth of ordinary shares, nor dividends for 2014 and 2015 on the $950 million worth of preferred shares owned.
The Scheme’s investments have faced scrutiny over the years due to its successive annual deficits. Its unaudited accounts for 2017 have revealed that it once again recorded a deficit instead of the surplus that was projected.
