THE recent Jamaica Debt Exchange (JDX) programme will cause the country’s National Insurance Fund (NIF) to earn J$1.2 billion (US$13.4 million) below the projected J$4 billion (US$44.8 million) in interest from Government bonds for 2010/11, but Labour and Social Security Minister Pearnel Charles is insisting that this will not affect the fund’s ability to meet its commitments.

He said while the JDX was the primary cause of the reduction in income, it will contribute significantly to containing the fiscal deficit, “without which inflation would erode the value of the benefits paid to beneficiaries”.

“The projections based on rates applicable subsequent to the debt exchange programme will not affect the ability of the fund to pay the benefits due to National Insurance Scheme beneficiaries, and will not preclude timely adjustments to those benefits based on actuarial review,” he said.

Charles pointed out that the Government’s economic programme, of which the debt exchange is a crucial element, projects that inflation will moderate to five to seven per cent over the next two years, which is well within the adjustments that the fund expects to be able to make.

He also noted that a significant portion of the NIF’s investment portfolio is held in real estate, the projected capital appreciation of which will enhance the fund’s ability to meet future payments to beneficiaries.

Charles was responding to a question from Opposition Member of Parliament Ronald Thwaites on the effects of the JDX on the NIF.

He said that the income is subject to fluctuations in interest rates, except where fixed rate instruments are held. He also mentioned that the NIF holds a mixture of fixed and variable rate Government of Jamaica instruments.

The NIF is funded by National Insurance contributions and is the source from which pensions and other benefits under the National Insurance Scheme (NIS) are paid.