Nicaraguan Social Security faces financial crisis

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By LatAm Reports Editor

The official goals are clear, for the eleventh consecutive year the finances of the Nicaraguan Social Security Institute (INSS) will close with a financial gap, which by 2023 is projected at 3,595.8 million córdobas; the third highest since 2013 when this debacle began. But over the past year the entity recorded small reliefs, driven by state transfers, which between January and October allowed it to accumulate a surplus of 9221.1 million. However, no solution is projected as the official goal is that by 2024 the deficit will reach 4.5.5.6 million córdobas.

The Public Finance Report released by the Ministry of Finance and Public Credit details that between January and October 35.788.1 million córdobas entered the INSS coffers in income. Of this amount, $32,026.7 million was obtained through social contributions and 3.761.4 million córdobas, equivalent to $105 million, through other income. The latter related to transfers from the General Budget.

The 3.761.4 million córdobas in other income was obtained in monthly instalments that varied over the months between 62 and 1.216.7 million córdobas. The report of the Ministry of Finance details that in February, March, April, August and October this item was around 215 million córdobas in each month (about $6 million); in May, June and July it was about 460 million córdobas (about $13 million) per month; while in January it was only 62 million córdobas (about $1.7 million) and in September it rose to 1.26 million córdobas (about $33.8 million).

Another income pushes surplus

As expected, most of the surplus accumulated by INSS finances between January and October 2023 was achieved in September, as a result of the increase recorded in that month by the item identified as other income. Of the 921.1 million córdobas accumulated until October, in September 544.1 million córdobas were contributed.

Meanwhile, in the period mentioned the month that recorded the most deficit in the aforementioned period was August, when expenditure exceeded the revenues by 460.8 million córdobas. According to the report, revenue remained within the average range of 3.5 billion córdobas per month in that month, but expenditures that had remained between $3,100 million and $3.5 billion so fared to 3,884.2 million.

This increase in imbalance was caused by the increase in the amount allocated to the purchase of goods and services. Between January and July, the item for the purchase of goods and services ranged from 830 to 1.175 million córdobas, but in August it stump to 1.562.4 million and caused the accounts to close in that month with an imbalance of 460,8 million córdobas. In September and October, the amount invested in the purchase of goods and services returned to the level of the first months of the year.

Expenses continue to exceed income

Meanwhile, between January and October, the accumulated expenditure was EUR 1,776.1 million in employee salaries; EUR 11,205.1 million in the purchase of goods and services; EUR 25.8 million in transfers; EUR 20,911.4 million in social benefits; and EUR 31.1 million in other expenditure, to complete 33.949.4 million córdobas in expenditure, so there was a surplus of 1,838.7 million córdobas.

But from that surplus of 1,838.7 million córdobas, 917,6 million córdobas were invested to acquire non-financial fixed assets, so in the end there was a surplus of 921.1 million córdobas. In the opinion of specialists, this relief has been achieved with the increase in the income guaranteed by the millions of transfers that the State made to INSS through the General Budget of the Republic.

These transfers through the budget continue to be recorded despite the fact that the exacerbation of the INSS financial crisis accelerated the payment of the historical debt of about $500 million that the State had with INSS and in 2014 pledged to pay in annual instalments of $10 million for fifty years. Although there is no official report on the subject, reports of the transfers indicate that this debt was cancelled in 2022, but transfers continue to appear in the budget and for ever higher amounts, which exceed $50 million per year.

Transfers to INSS continue to grow

For example, according to official reports between 2020 and 2023, these transfers amounted to 7,412 million córdobas (about $206 million), in 2023 the budget projected to transfer $60 million and in 2024 the allocated item is 2,242.8 million córdobas, equivalent to about $62 million.

The most serious thing is that far from seeking a solution to this crisis that puts at risk the benefits received by the insured, since the State is obliged to assume the pensions of retirees, so far the only measure that has been taken is to transfer resources through the budget, mechanisms that according to specialists, given the limitations of the budget is not sustainable in the long term.

In addition, it should be recalled that in 2021 the technical reserves were exhausted and the entity began to accumulate a debt that closed that year by 2.697 million córdobas. And in the absence of disclosure of the 2022 INSS Statistical Yearbook, it is unknown how much it amounted during that year.

It remains to wait for the Ministry of Finance to publish the operational results of November and December to verify whether the official projection that estimates the deficit with which it will close 2023 is met is fulfilled. With this deficit, INSS would complete eleven consecutive years of imbalance in its finances, without a solution to this crisis being sought so far. On the contrary, Budget 2024 provides that this year the financial gap will widen to 4.5.6 million córdobas.

This article has been translated from the original which first appeared in La Prensani