Facing a third consecutive year of fiscal deficits, Hong Kong is implementing spending cuts and strategic investments to regain financial stability. Finance Secretary Paul Chan announced key measures during the budget speech, including job cuts, tax hikes, and AI investments.
Civil Service Job Cuts & Salary Freeze
To curb government spending, Hong Kong will:
- Cut 10,000 civil servant jobs by April 2027 (2% reduction per year).
- Freeze civil service salaries for 2024.
- Reduce government recurrent expenditure by 7% by 2027-28.
New Taxes & Bond Issuance
To raise revenue, authorities will:
- Increase the airport departure tax from HK$120 ($15.50) to HK$200 ($25.70)—a 67% hike starting Q3 2024.
- Issue HK$195 billion ($25 billion) in bonds over five years, with more than half used to refinance short-term debt.
Major AI & Tech Investments
Despite budget constraints, Hong Kong aims to become an AI and technology hub:
- Allocate HK$1 billion ($129 million) for an AI research and development institute.
- Establish a HK$10 billion ($1.29 billion) innovation and technology fund for emerging industries.
Economic Challenges & Shrinking Reserves
Hong Kong’s financial struggles stem from:
- A 30% drop in home prices over the past three years.
- Declining land sales revenue, once 20% of government income, now just 5%.
- US-China tensions affecting economic stability.
The city’s fiscal reserves are expected to shrink 12% by March 2025 and another 10% in 2025-26, dropping from HK$734.5 billion ($94.5 billion) to HK$647.3 billion ($83.3 billion).
With a strategic push into AI and tech, Hong Kong hopes to revive growth while balancing its fiscal position in the coming years.
