The government of Hong Kong Special Administrative Region put forward a balanced budget on Wednesday, focusing on enhanced fiscal consolidation programs to cut a swirling budget deficit, while at the same time pledging to provide sustainable funding for economic development.

The SAR estimated it will incur a consolidated deficit of HK$87.2 billion ($11.8 billion) for the financial year of 2024-25, more than 81 percent compared to the original forecast made in February last year. Fiscal reserves at March 31 are expected to be HK$647.3 billion, 5.5 percent less than the original forecast a year ago.

For the financial year of 2025-26, the SAR projected the budget deficit will further narrow to HK$67 billion while fiscal reserves will also decrease to HK$580.3 billion.

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In the medium term, the government expects its consolidated account will return to the black starting in the financial year of 2028 as the deficits in the operating account and capital account will gradually reduce every year over the next five years.

The SAR proposed a slew of measures to consolidate public finances. It will step up its productivity enhancement program. Starting from the financial year of 2024 to 2027, the government’s recurrent expenditure will be cumulatively reduced by 7 percent.

The executive authorities, the legislature, the judiciary and District Council members will take a pay freeze for 2025-26. About 10,000 government jobs are expected to be slashed within this term of government.

The administration will also adjust the HK$2 Scheme and Public Transport Fare Subsidy Scheme, saving HK$6.2 billion in the coming five years.

It also proposed bringing back HK$62 billion from the six seed capital funds of different government bureaus and departments to the government accounts for the fiscal year of 2025-26.

The government also announced an increase in revenue streams based on the “user pays” principle that will bring in an additional revenue of approximately HK$20.2 billion per year.

“The budget proposes pragmatic measures to improve public finances, focusing primarily on strictly controlling government expenditures, supplemented by suitably increasing revenue, to steadily restore fiscal balance while taking into account the actual social situation and Hong Kong's competitiveness,” Chief Executive John Lee Ka-chiu said in a government statement on Wednesday.

At the same time, the budget also put forward various measures to strengthen foundations for accelerating development, including nurturing new quality productive forces, developing innovation and technology and artificial intelligence (AI), and speeding up development of the Northern Metropolis and the Hong Kong Park of the Hetao Shenzhen-Hong Kong Science and Technology Innovation Co-operation Zone.

“One is to consolidate and enhance traditional industries, such as finance and trade, while the other is to nurture new industries and sources of growth. Information and technology are seen as the most crucial drivers, whereas artificial intelligence plays the most important role in the development of information and technology,” Financial Secretary Paul Chan Mo-po said in a Wednesday press conference.

The finance chief added that the size of the government bond issuance program will be expanded up to HK$195 billion annually from 2025 to 2029, with the borrowing ceiling raised to HK$700 billion in the medium term. The ratio of government debt to gross domestic product will stay at between 12 percent and 16.5 percent, which is a prudent and manageable level, he added.

“We support this sensible and logical budget as it takes into account the needs of various stakeholders, offers incentives, and controls costs while supporting Hong Kong's long-term development through bond issuance,” Hong Kong General Chamber of Commerce Chairman Agnes Chan Sui-kuen said.

READ MORE: Chan aims at reinforced fiscal consolidation in HK budget speech

“The government has prudently advanced fiscal consolidation while insisting on promoting innovative technology and new industrial development, assisting traditional advantageous industries in upgrading and transforming, and leading Hong Kong to explore new economic growth points.” Federation of Hong Kong Industries Chairman Steve Chuang Tzu-hsiung added.

Jonathan Choi Koon-shum, chairman at the Hong Kong Chinese General Chamber of Commerce, agreed: “The budget actively allocates resources to support technological innovation, strengthen new economic drivers, consolidate and enhance the competitiveness of Hong Kong's advantageous industries, and explore new opportunities for cooperation in emerging industries and regional markets.”

The SAR expects Hong Kong to post an annual economic growth of 2 to 3 percent this year, with an average growth of 2.9 percent from 2026 to 2029.