Faroe Islands must cut spending as public sector deficits surge

The Faroese government and municipalities recorded combined deficits of 4.8 billion krona in 2024, with economists warning that unsustainable spending risks driving up prices and widening inequality, reports Kringvarp Føroya.

New figures from Statistics Faroe Islands show municipalities ran a deficit of 1.26 billion krona last year, while the central government’s shortfall reached 776 million krona. Together, their combined deficit has more than doubled since 2012, when it stood at 900 million krona.

Economist Kári Petersen told the broadcaster’s programme Undir egið borð that persistent public-sector deficits—now totaling 1.8 billion krona for government and municipalities—are “pushing up prices for everyone,” with low-income households bearing the brunt. He urged authorities to rein in spending, noting that “when labour [unions] also posts such large deficits, it fuels inflationary pressure.”

The national labour movement’s deficit has surged from 378 million krona in 2013 to 1.8 billion krona in 2024. With unemployment long below 1%, Petersen linked tight labour markets to the combined 4 billion krona in deficits across the public sector and organised labour, warning of economic strain if trends continue.