These bad investments are being highlighted as NIB officials recently expressed concerns that the Fund is already in jeopardy and could be depleted in a quarter of a century if the current 8.8 percent contribution rate is maintained.
But government officials point to the difficulty in “pressuring” corporations to repay their loans as all the funds involved are really public funds.
“It’s like the government getting on the government to pay back a quasi-government entity,” one official noted.
The Water and Sewerage Corporation alone has been in default of two loans for a dozen years, according to the December 31, 2002 consolidated financial statements that the Board is preparing to release.
From as far back as 1984 and then again in 1987, the corporation borrowed a total of $5.4 million to finance various commercial bank loans and to carryout a water supply and sewerage rehabilitation project in New Providence.
But as of July 1, 1991, the corporation was in default of repayments and interest on both loans. The outstanding principal and interest repayments now amount to about $15 million.
Bahamasair also owes the Fund millions of dollars.
In October 1989, the airline borrowed $6 million to expand its operations.
But it too has been in default for 12 years and now owes NIB more than $13 million.
The Fund has traditionally granted loans to various government corporations for different projects.
Ten million dollars was loaned to the Bahamas Electricity Corporation in 1989 to expand their power generating system. The current portion of that loan that is due this year is $528,000, according to the financial statements.
The Bahamas Development Bank, meanwhile, is still paying off a $3.5 million loan it got way back in 1984 to enable it to lend to deserving borrowers in the field of agriculture, small-scale industry and fisheries.
An official close to the Fund told the Bahama Journal that there is no telling if or when Bahamasair and the Water and Sewerage Corporation will be in a position anytime soon to repay their loans.
Bad loans aren’t the only factors that may lead to placing the Fund in jeopardy.
NIB’s most recent Actuarial Review said that changes have become necessary to counter the effects of ageing populations, projected cash shortfalls and declining public confidence in such social programmes.
On December 31, 2001, NIB benefits reserves stood at $1.1 billion.
The size of the National Insurance Fund relative to the Bahamian economy, and the restriction on investing overseas, often makes it difficult to find suitable investments, the report noted.
With reserves projected to nearly double in the next 15 years, new investment avenues and a revised approach to investing NIB funds will be required, according to the Actuarial Review.
By Candia Dames, The Bahama Journal
