Weekly Column

“Courage is what it takes to stand up and speak
Courage is also what it takes to sit down and listen.“
- Sir Winston Churchill

The Minister of Health and National Insurance would do well to heed these immortal words of Sir Winston Churchill when prescribing remedies for the investment of pensions funds owned by thousands of Barbadians.

No amount of ungracious shouting across the floor of the House about lecturing by some, who should know better, will dispute two simple facts. One, that Owen Arthur has a considerable grasp of the intricacies of large injections of cash into the local economy and two, this is a young Government with only one member who has had any Cabinet experience.

It is time that the Government faces its fears and the reality that the Opposition is not seeking to deny them the chance given to them by the electorate to run the country. By the same token we will not sit idly by when the security of Barbadians’ pensions is being threatened.

While we can admire the spirit of the Doctor’s prescription, simplistic though it is, to invest the millions in paid up contributions in a socially productive remedy, we must caution against playing fast and loose with people’s future financial security. The $300 million in surplus contributions Bajans make to the National Insurance every year must be invested to yield the greatest possible return in the safest possible way. We trust that one of the “dynamic duo,” preferably Senator Boyce, will give the Doctor a crash course in “Investing 101.”

What are the available options? Previous NIS Boards have been challenged to find the right mix of investment vehicles to earn the best return with the least risk, in addition to the strictures imposed by the domestic economy’s ability to absorb such large inflows of cash. Size does matter in this case, Doc.

Dr. Estwick has stated that the NIS must stop financing Government’s debt. However, Government debentures,(preferred because of their higher yield)and treasury bills are considered a soft risk simply because no Government of Barbados has ever defaulted on payment. It therefore has less to do with financing Government’s debt and more to do with the prudent financial management of the people’s money.

Further, the NIS is limited to a 10% cap when it invests in equity of companies so as to minimize any risk. Any investment over this requires Ministerial approval.

Foreign investment has been increasingly allowed in the last decade. The NIS may invest in US Treasury Bonds, earning a good yield, spreading the risk and removing the surplus that the domestic economy would be hard pressed to comfortably absorb. However, apart from taking foreign exchange from Barbados, we are effectively financing the deficit of the USA – doing for the USA what Dr. Estwick does not want us to do for Barbados.

Further, investment in low-income housing is essentially in the sub-prime market. The NIS has traditionally made some of its investments in housing but through financial institutions structured to deal with housing, like Barbados Mortgage Finance Corporation. The investment must be carefully appraised and managed if we are to avoid the historic crash of this market segment recently witnessed in the U.S.A. It is here that the Doctor’s prescription could well become an unpalatable antidote with some nasty and unwanted side effects.

If we write an open cheque to the people most at risk by any contraction in the economy and they cannot make their mortgage payments their personal misfortune will have ripple effects throughout the whole economy. And it is not that we do not want people to progress but the exposure to high risk must be contained.

Now is not the time for experimentation Dr. Estwick for not only will you be putting peoples’ life savings at risk, but their pensions as well.