The Falkland Islands Executive Council, (EXCO), considers essential more public scrutiny to budget affairs discussions so that individuals can better understand what monies are available for ongoing funding and which are windfall incomes from oil related matters.
The issue becomes more urgent following the capital gains tax agreement reached with Rockhopper Exploration which amounts to 146 million dollars resulting from its sale of a 60% stake in the Sea Lion oil field to Premier Oil in 2012
Precisely on this overall issue the Falklands Financial Secretary elaborated a paper about Budget Strategy for the forthcoming financial year.
In its release of the last meeting, EXCO said it believed that this paper was a good first step in developing a strategy but we wanted to involve the Policy Unit and economists within that unit to better assess the effects of decisions on the economy of the Islands as a whole.
Furthermore we were also very keen to see the budget presented in a way that clearly shows what is recurrent income and what is windfall income from oil related matters.
And emphasized that this was essential so that people could better understand what monies are available for ongoing funding, not simply one off Capital Program.
Likewise discussing this paper EXCO members also considered how to open up the Budget Select Committee to public scrutiny.
We felt it would be relatively easy to open the meeting to the public and the media when we were discussing overall strategy and we hope to have this in place for the forthcoming budget round.
The onetime windfall earnings from a single resource have been a standing challenge for oil rich or strategic metal rich countries. Recent history is littered with countries that succumbed to the spending temptation, even when these are non renewable resources, but there are also intelligent solutions such as Norway, Netherlands, Singapore and some Arab countries with well managed sovereign funds, and closer in South America, Chile with its copper sovereign fund.
In the case of the Falklands it must be taken into account that according to the official site of the Islands government, GDP has been estimated at £.100 million, international reserves for a 'bad day' stand at £ 200 million (mostly accumulated during the boom of the fisheries licensing and prudent fiscal management) while budget revenue is in the range of £ 46 million and outlays, £ 43 million.