Falkland Islands economy remains strong, despite challenges ahead

 

In the annual State of the Nation address on 31 May, the Governor, Colin Roberts, said that the finances of the Falkland Islands Government (FIG) were in robust order with a moderate fiscal deficit planned for 2016-17 underpinned by strong reserves (and no borrowing). But he warned that, in the mid to long-term, it would be difficult to sustain a budgetary deficit of the level proposed without a go-ahead on oil production. An ageing population would struggle to maintain the current level of public services, without careful planning and adjustment. The external environment also harboured uncertainty with the global economy experiencing low growth and low commodity prices – and the outcome of the UK’s EU referendum on 23 June, if in favour of a British exit, could have a negative impact on Falkland Islands exports. 

The next few years were, he said, a crucial opportunity to strengthen the Islands’ economy by improving connectivity, encouraging investment and developing the workforce. Regional markets were increasingly open to partnerships with the Falklands; there were many opportunities for development in tourism; and the Defence Secretary’s initiative, following his visit earlier this year, to promote new business opportunities between the Ministry of Defence and local businesses should open a new phase in the partnership between the civilian and military communities in the Falklands. Plans were being developed to improve the air terminal facilities at Mount Pleasant airport (MPA) to increase capacity and transform passenger experience, with the prospect of going out to tender in early 2017. Efforts would also continue in trying to secure a second commercial air link between the Falklands and South America. 

With the completion of the recent oil exploration round, the focus was now on working with Premier Oil on progressing development planning for the Sea Lion field. Premier Oil were pushing ahead with the Front End Engineering and Design process (FEED) with their chosen subcontractors with the goal of taking a firm decision on the development of the Sea Lion field in mid-2017. FIG would also be updating the regulatory framework to ensure that standards matched the advances in the regulatory regime for oil development in the UK’s North Sea. 

The budget bill for 2016-17, presented in the same session of the Legislative Assembly, showed planned appropriations of £62.9 million against anticipated revenues of £61.3 million, with the £1.6 million deficit being balanced by funding from reserves. FIG revenues had been hit by the end of oil exploration activity and by the collapse of the Illex squid fishery (with only 2000 tons caught, usually the catch of one vessel) which would require the reimbursement of licence payments. The latter would be partially offset by stable catches of loligo squid – and the tourism sector was buoyant with over 60,000 cruise ship visitors in 2015 and leisure tourism forecast to increase by 6%. Public sector worker salaries would rise by 1% and the minimum wage would be increased to £5.81 an hour and the living wage to £7.26 an hour from 1 January 2017.