The Auditor-General states in his recently published report that 80% of the NIS Fund is invested in Government Debt. This raises several questions.
- Are the investments in Government debt in compliance with the NIS Fund’s own Board approved investment mandate and guidelines? What are those guidelines? The public should know.
- What are the terms on which these funds are lent?
- How much is short, medium and long term?
- What are the interest rates being paid? Are these returns adequate for the risk?
- Is Government able to repay these debt on the terms approved?
- Could Government find an alternative source of funding and on what terms?
Portfolio diversification is a fundamental principle of good investment management; owning 80% in one asset class/issuer name is a significant breach of that principle. The international rating of Barbados’ sovereign debt is at ‘junk’ level which should be a red flag to the Board of the NIS who have a fiduciary responsibility to the beneficiaries of the Fund.
Other investments/assets owned by the NIS Fund
It is understood that the 20% not invested in Governmenet Debt is otherwise invested. What are these assets? What returns do they generate? How risky are they?
We know some funds were used as a bail-out for the Four Seasons project. Details are scant. What has this cost the Fund? What other investments have been made by the NIS Fund? Details of Investments on the NIS website prompt more questions than provide answers. See http://www.nis.gov.bb/NIS-InvestmentsSection/investments.cfm.
Who is making the investment decisions?
Without access to the NIS Fund, Government is illiquid and bankrupt. The Government is already seriously over-borrowed. Institutional Investors have little appetite for further Barbados Government debt. It is hard to see how further borrowing for a stimulus package can assist with our present crisis. Who stands to benefit most? Who will provide the funding and on what terms? Government is unable to pay its suppliers on time. Are we simply piling Pelion on Ossa?
We need desperately to face reality and get on with structural adjustment of our economy. Delay will just make it more painful. Where is the integrity we were promised?
The NIS Fund is owned by its contributors
The contributors, employers and employees, are required by law to contribute to the Fund. They have no choice.
If competition was allowed for these personal savings the NIS may find it could not attract funding on such under-regulated, soft terms and with virtually no accountability. The Fund is supposedly in surplus (at least assuming the Government debts and other assets are worth their book value).
How much confidence does the Public of Barbados have in the management of the NIS Fund? As a pensioner I have none as it is clear that the Fund is not sufficiently independent of Government and appears to deem itself unaccountable. Essentially what we have is another tax in the guise of an NIS Fund.
Legal fiduciary responsibility of the Board
There are no current audited financial statements available for the NIS Fund. Why not? This situation is untenable. The Central Bank Of Barbados, to comply with International Best Practices, rigorously regulates other Financial Institutions in Barbados. Why not the NIS which is the largest local pool of capital? Hypocrisy of the highest order.
Directors of the NIS are exposing themselves to litigation for failure to prudently manage the NIS Fund in accordance with the laws of Barbados, approved Board mandates and guidelines and acceptable best practices of investment management of National Insurance Funds.
Barbados is an associate member of the International Social Security Association in Geneva (http://www.issa.int/About-ISSA/Mission-programme). To quote ISSA:
The ultimate objective of social security systems is to honour benefits when they are due. This means, first of all, being financially sustainable.