THE INTERNATIONAL MONETARY FUND (IMF) has warned the Freundel Stuart administration that the National Insurance Scheme (NIS) could face a shortfall in funds if Government and state owned enterprises (SOEs) continues to pay the scheme late.
The Washington-based institution also stressed that future shortfalls in NIS funds could result in a reduction in benefits the scheme presently offers.
The IMF’s concern was outlined in their 2016 Article IV Consultation report on Barbados, which was concluded in May.
Though noting the NIS was “well managed”, the IMF urged Government to “make contributions in a timely manner (rather than providing the equivalent in debentures) to ensure that NIS has sufficient liquidity”.
Explaining why this was imperative, the IMF stated: “The weak employment growth in recent years has led to a deterioration of the NIS financial position and expenditures began to exceed contributions in 2013, rather than in 2024 as estimated in the 14th Actuarial Review, 8 and, since 2014, the NIS has faced late contribution payments from the government and SOEs.”
In the section of the report titled “Maintain NIS integrity”, the IMF said the bulk of the NIS’ investment portfolio, 74 percent, is held in government securities, 20 percent more than the suggested prudential limit and the NIS’ own target of 60 percent.
“Given high contribution rates and the adjusted retirement age, there is limited scope to address future shortfalls other than by reducing benefits,” said the IMF, who also noted that the NIS faces pressure from population ageing and slow growth.