Hong Kong is set to cut 10,000 civil service jobs and ramp up investments in artificial intelligence (AI) as part of a sweeping strategy to curb its escalating financial deficit, international media reported.
In his annual budget speech on Wednesday, February 26, Finance Secretary Paul Chan outlined a plan to reduce the government’s recurrent expenditure by 7% by the fiscal year 2027/28, according to the Associated Press (AP). Hong Kong’s fiscal year begins on April 1.
A key part of the strategy includes positioning Hong Kong as a global hub for AI research and innovation. To achieve this, the government has allocated HK$1 billion for an AI research institute and will establish a HK$10 billion (USD 1.29 billion) fund to invest in emerging technologies with strategic significance.
As part of the fiscal consolidation, around 10,000 civil service positions will be eliminated by April 2027, representing a 2% annual reduction in the public workforce over the next two years. Additionally, public sector salaries will be frozen for the current year.
“It gives us a clear pathway towards the goal of restoring fiscal balance in the operating account, in a planned and progressive manner,” said Chan.
Hong Kong faces an HK$87.2 billion (USD 11.2 billion) fiscal deficit for the current fiscal year, marking its third consecutive year of financial losses. To address this, the government will issue up to HK$195 billion (USD 25 billion) in bonds over the next five years to fund key infrastructure projects and refinance short-term debts.
In addition to spending cuts, Hong Kong plans to increase the airport departure tax by 67%, from HK$120 (USD 15.50) to HK$200 (USD 25.70), starting in the third quarter of this year.
Hong Kong's economy continues to struggle due to a slumping property market, with home prices declining by approximately 30% over the past three years. Diminishing land sales have also weakened government revenue, with land premiums dropping from 20% to just over 5% of total revenue.
As a result, financial reserves are expected to shrink by 12% to HK$647.3 billion (USD 83.3 billion) by the end of March, with another 10% decline projected for 2025-26.
Some analysts have questioned whether these measures go far enough, calling for broader structural reforms, Reuters reported. Meanwhile, Hong Kong's GDP is expected to grow between 2%-3% this year, compared to 2.5% in 2024 and 3.2% in 2023.
With a growing number of governments and institutions restructuring their bureaucracies, Hong Kong’s shift towards AI-driven governance and financial discipline reflects a broader global trend.
Singapore's largest bank, DBS, recently announced plans to eliminate 4,000 jobs over the next three years as AI takes over tasks traditionally performed by humans, BBC reported.
Vietnam’s National Assembly has approved an ambitious administrative reform, cutting the number of ministries from 18 to 14 to streamline governance and reduce expenses.
In the United States, billionaire Elon Musk has pushed for mass layoffs in federal agencies, arguing that government employees must justify their roles or face termination, AFP reported.
An International Monetary Fund (IMF) analysis in 2024 estimated that AI will impact 40% of all jobs, often deepening social inequality.
