BUSINESS MONDAY: ‘Reform public sector pensions’
WITH public sector pensions in Barbados deemed the highest among Caribbean countries, the Inter-American Development Bank (IDB) is calling for action to lower the costs of such payouts.
And it is warning that unless something is done, the country can face real challenges going forward in this area of Government expenditure, and to the National Insurance Scheme (NIS).
Laura Giles Alvarez and Ariel McCaskie highlighted the views of the IDB in its latest Caribbean Quarterly Bulletin dated December 2020.
The position by the IDB comes as uncertainty surfaces among Barbadians fearful as to what the Government of Barbados will do with the pensions. It appears a commitment has been given to the International Monetary Fund (IMF) to make the adjustments.
However, two weekends ago, Government’s Senior Economic Adviser, Dr. Kevin Greenidge, was quoted in the media as suggesting no dictate to reform public officers’ pensions has come from the IMF, and that reforms are unlikely.
“Rising costs going forward could be a challenge, particularly given the impact of debt restructuring and the pressure of COVID-19 on the National Insurance Scheme,” said the IDB officials, who prepared the Barbados report in the bulletin.
“Policymakers should also periodically review the design of multi-pillar systems and assess ... what changes in the pension scheme are required to achieve adequate benefits, expanded coverage, and financial sustainability of the system,” they recommended.
They said that Barbados has the highest pension expenses among Caribbean countries.
“The disbursement of pension expenses for civil servants as a share of total expenses is also the largest in the Caribbean at 32.2 per cent,” said the IDB officials.
In addition, it was pointed out that in 2019, Barbados had the highest level of public pension spending among Caribbean countries, reaching 7.7 per cent of GDP, followed by Trinidad and Tobago with 5.59 per cent, Guyana 5.28 per cent, and Suriname 4.05 per cent.
For the current financial year which ends March 31, 2021, pensions and other benefits are expected to reach $297.8 million, according to the Draft Estimates of Revenue and Expenditure.
Forward projections by the same Estimates were put at $335.7 million for the forthcoming financial year, staring April 1, and $369.3 million for the following year.