By NEIL HARTNELL
Tribune Business Editor
The Government’s unfunded multi-billion dollar pension liabilities, projected to hit $3.7bn by 2030, were yesterday branded “a big time bomb waiting to go off”.
Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, told Tribune Business that unfunded civil service pensions were threatening to send The Bahamas “bankrupt” unless swift corrective action was taken.
He spoke out after the International Monetary Fund (IMF), in its full Article IV report on The Bahamas, again warned that the current system - where civil servants contribute nothing to funding their retirement - is “unsustainable”.
The Washington DC-based Fund again listed civil service pensions, together with the public sector’s wage bill and loss-making state-owned enterprises (SOEs), as three key reforms that the Government must target if it is to reverse The Bahamas’ fiscal decline.
“The civil servants’ pension system is unsustainable,” the IMF warned. “Government employees draw pensions at retirement without contributing to the system while employed.
“Staff analysis in the 2016 Article IV Staff report noted that accrued government pension liabilities totaled B$1.5bn in 2012, and would rise to B$3.7bn by 2030 as the population ages.”
The IMF called for reforms that involve “moving to a contributory regime in the near term, and to a defined-contribution scheme in the medium-term”. This would require civil servants to contribute a portion of their salary to funding their retirement, rather than having this financed 100 per cent by the taxpayer through the Budget - as is done currently.
Mr Myers yesterday described these unfunded pension liabilities as the Bahamas’ “single biggest problem” alongside energy costs, the near-$8 billion national debt and $300 million-plus annual deficits, and accused successive administrations of “ignoring” the looming problem.
“That’s going to be a big time bomb waiting to go off,” the ORG principal told Tribune Business of the civil service pensions. “That’s a big issue that they just keep ignoring. The pension liabilities, outside of debt reduction and deficit reduction, it’s the single biggest problem we have.
“It’ll make the losses incurred by Bahamasair pale in comparison, or any of the others. You could take ZNS and all the others, add them together, and the [pension] liabilities would still be significantly bigger. If you look at those numbers, it’s tantamount to telling you that if you don’t deal with it you’re going to go bankrupt.”
The Government has known of its growing pension crisis for some time, but successive administrations have neglected to take any corrective action, instead preferring to ‘kick the can down the road’