The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Governance reformers yesterday warned “there is no more time to avoid the pain” associated with saving the National Insurance Board (NIB) as they called for “a clear plan” of rescue that will gain widespread buy-in from society.

Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business yesterday that the Government was caught between the twin dilemmas of trying to avoid imposing further costs on already-struggling businesses and workers while, at the same time, realising it cannot avoid corrective action to sustain the country’s social security system for much longer.

“With all good conscience, it cannot continue to be pushed down the line without a clear plan of what happens going forward,” he said of reforms that will almost-certainly involve increased contributions and rates for both employer and worker. “The recommendations that government has had, small amendments have happened, but nothing significant to right this.

“What we saw from the Government’s comments in the last few weeks is the challenge. This thing is so critical for us and needs to be resolved. Clearly, we are in unprecedented times, and there’s going to be a significant impact doing anything going forward with NIB, but it cannot sit any longer. It’s six years away, and think about those folks that made contributions for years in good faith. What’s their status?”

Mr Aubry added that “if pain is to be incurred” in fixing NIB, and ensuring it survives, all Bahamians needed to know what that cost will be and how it impacts them. If they can see how reforms will benefit themselves, their families and the entire country, they will be more likely to buy-in to any rescue plan even if it impacts take-home pay and disposable income.

Also calling for greater transparency and improved governance over NIB’s investments and its operations, ORG said in a release yesterday: “ORG recognises that the National Insurance Board, like many other government and quasi-government-run institutions, faces significant operational challenges that require immediate remedies. Many of these are resulting from decades of short-term ‘painless’ and politically safe approaches.

“Our current circumstances, amidst rising inflation and a global fuel crisis, do not present an ideal time to address the long-standing issues of NIB. But years of avoiding the pain of significant long-term reform have left The Bahamas with few other options. As evidenced by the imminent risk of NIB’s ultimate depletion, there is no more time to avoid the pain. To achieve sustainability, NIB must be fixed to address the needs of Bahamians in the future.”

Myles Laroda, minister of state in the Prime Minister’s Office with responsibility for NIB, earlier this month revealed that actuaries are forecasting the social security system’s $1.6bn reserve fund will be fully depleted by 2028 if no reforms are implemented. Benefit payouts were exceeding contribution income prior to COVID-19, due to an ageing population that is living longer and supported by fewer working Bahamians.

He added that the just-completed 11th actuarial review had recommended a contribution rate increase of between 1.5-2 percent that could come as early as this year depending on whether the Davis administration agrees to implement it.

And this will not be a one-time rate increase, as the minister warned Bahamians to brace for “numerous increases” over several years in a bid to shore up NIB’s $1.6bn reserve fund which, according to the actuarial review’s projections, will be completely exhausted by 2028 - just six years away.

NIB’s present reality was predicted more than two decades by its seventh actuarial review, completed in 2001, which forecast that “reserves are projected to become exhausted” by 2029 if comprehensive reforms are not implemented to address the fundamental problem of benefit payouts exceeding contribution income. The recipient of that review, which was only one year out, on September 11, 2002, was then-NIB chairman and now-Prime Minister, Philip Davis QC.

Now, with just six years left to the NIB Fund’s total depletion, the magnitude of the correction will be that much more severe for businesses and workers already grappling with surging inflation, COVID recovery, rising gas prices and a potential minimum wage increase. Private sector executives have described the prospect of NIB contribution hikes as a “double” or even “quadruple whammy” for a business community still fighting for “survival”.

ORG’s statement yesterday backed Mr Laroda’s position, saying: “The crucial role the NIB plays in The Bahamas, as the primary source of financial benefits to various segments of the population, is undeniable. This is particularly so for vulnerable communities such as those who have retired or who have become disabled.

“The mandate and objectives of the NIB to support Bahamians makes its failure and the resulting socio-economic impacts almost unthinkable. Simply put, The Bahamas needs a working NIB to achieve a positive and sustainable future.”

Noting that NIB had financed the payment of some $100m in unemployment benefits during COVID-19, thereby providing a safety net for thousands of Bahamians and their families who saw their income dry up overnight, ORG added: “The dilemma presented in the Government’s exchange about how to deal with the current NIB problems reflects a bigger systemic issue.

“With acknowledgment of the unprecedented and significant economic hardship of The Bahamas’ current state, succeeding administrations have taken a similar stance to delay addressing the fundamental problem of NIB, which is extremely time sensitive.”

Noting that it was vital that NIB regain public trust via on-time financial reporting, the last annual report having been for 2017, ORG added: “The fund has been regularly used over numerous administrations as a secondary pool of funding by governments with minimal consistent rationales for such actions. Unrealised housing developments, no return government projects and even a bailout of The Bank of The Bahamas have occurred to the detriment of the long-term fiscal health of NIB.

“Fundamentally, NIB was not designed to serve as an alternative source of revenue or offer government a resource to bail-out bad investments. In response to this practice, there have been ongoing urgent and unanswered calls from civil society and the private sector for greater transparency on the usage of the NIB funds and investments. There is a strong case for the need for an immediate clear and open long-term plan toward effective fiscal management and restoration of the viability of the fund.”