Sri Lanka farming insurer in Rs67bn financial black hole
ECONOMYNEXT – A state-run agricultural insurance which has been mis-used by successive politicians to grant populist insurance schemes has acquired a 67 billion rupees hole in its balance sheet, which is rapidly ballooning, data shows.
Sri Lanka’s Agricultural and Agrarian Insurance Board’s gap in the balance sheet has grown to 67.7 billion rupees by 2016, up 4.01 billion rupees from 2015, a report by the Public Enterprise Department of the Finance Ministry shows.
The gap is more than half a percent of gross domestic product.
The AAIB entity made a loss of 3.26 billion rupees in 2016. Its revenues had collapsed to 796 million rupees from 3,650 million a year earlier.
The insurance board had assets of just 3.4 billion rupees and liabilities of 68.6 billion rupees, generating the 67.7 billion rupee gap in the balance sheet.
The bulk of the losses are coming from a farmers’ pension scheme which had originally started in 1987, according to the 2014 annual report filed in parliament.
The auditor general has qualified the 2014 accounts of AAIB and raised a ‘going concern’ red flag over the farmer’s pension scheme, which had 123,000 beneficiaries. It also has an insurance scheme for fishermen.
In March 2014 the government had issued a gazette announcing a new scheme and had given 1.94 billion rupees in tax payer funds to make payments, the auditor general said.
Taxpayers had pumped 2.27 billion rupees to keep the AAIB afloat in 2015 and another 2.69 billion in 2016.
The ballooning pension liability shows the danger of promising pensions without adequate premiums or are unfunded, which become ticking time bombs.
Sri Lanka’s public sector is also has an unfunded pension scheme, which is paid with taxes collected from the people. Nishan De Mel, head of Verete Research, a think tank has said that the state pensions could add up to about 25 percent of gross domestic product. (Colombo/Oct03/2017)