In an effort to address its growing deficit, Hong Kong officials announced Wednesday that it would increase expenditure on artificial intelligence and eliminate thousands of civil service positions.
In a budget speech, Finance Secretary Paul Chan stated that government recurrent spending would be “cumulatively reduced” by 7% between now and 2027–2028.
For the fiscal year 2024-2025, Hong Kong’s deficit reached $87.2 billion Hong Kong dollars ($11.2 billion), marking the third consecutive year of deficits.
According to Chan, “it provides us with a clear path towards the goal of restoring fiscal balance.”
Approximately 2% of the public service would be reduced in each of the next two years, he claimed, with 10,000 civil servant positions to be eliminated by April 2027. This year, the civil service will likewise have its salaries frozen.
Chan said that bonds of up to $195 billion Hong Kong dollars ($25 billion) will be issued over the course of the next five years to guarantee the advancement of significant infrastructure projects, with over half of that amount going toward refinancing long-term debt.
Laptops 1000In an effort to enhance revenue, Hong Kong will also hike the airport departure tax by 67%, from 120 Hong Kong dollars ($15.50) to 200 Hong Kong dollars ($25.70) starting in the third quarter of the year.
By utilizing the city’s “internationalized characteristic to develop Hong Kong into an international exchange and cooperation hub for the AI industry,” Hong Kong will also push into artificial intelligence on its own.
In addition, authorities will establish a $10 billion ($1.29 billion) innovation and technology fund to invest in “emerging and future industries of strategic importance” and have allocated $1 billion Hong Kong dollars for an AI research and development institute.
A sluggish real estate market has affected Hong Kong’s finances, as house values have fallen by about 30% in the last three years.
As U.S.-China relations worsen, it is also battling geopolitical tensions and economic instability.
Hong Kong’s earnings have suffered as a result of developers paying the government less in land premiums.
Previously, land sales accounted for over a fifth of government revenue, but in the most recent fiscal year, this percentage dropped to just over 5%.
By the end of March, Hong Kong’s fiscal reserves will have decreased by 12%, from $734.5 billion Hong Kong dollars ($94.5 billion) to roughly $647.3 billion Hong Kong dollars ($83.3 billion), and by an additional 10% in 2025–2026, according to Chan.
