The Government's Budget Speech for 2026-27 emphasizes fiscal consolidation and improving public finances. Key initiatives include controlling expenditure, increasing revenue through stamp duty and OECD's global minimum tax, and optimizing the use of government financial resources. Additionally, the Bond Fund surplus and Investment Income from the Exchange Fund will be transferred to support infrastructure projects.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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On February 25, 2026, the Government unveiled a robust fiscal consolidation program in its Budget Speech, with the objective of achieving fiscal balance. Previous pandemic-related fiscal measures led to deficits, which this program aims to address.
Over the past year, significant revenue growth occurred due to strong stock market performance and economic expansion. The Operating Account is projected to return to surplus in the 2025-26 fiscal year, while the Consolidated Account will be balanced after accounting for bond issuance.
In the medium term, the Operating Account will maintain a surplus, while the Capital Account will show an annual deficit. Increased bond issuance will fund infrastructure projects, and fiscal reserves are projected to rise to over $700 billion.
The Government is dedicated to keeping expenditure within revenue limits, targeting fiscal balance, and ensuring public finances' resilience and sustainability. The fiscal consolidation program will prioritize strict expenditure controls and increased revenue.
Operating expenditure will be strictly controlled through the review of resource allocation and streamlined procedures in government bureaus and departments. Additionally, the civil service establishment will be reduced by two percent annually for the next two financial years, resulting in a cumulative reduction of over 10,000 posts.
Revenue will be enhanced through various measures. Stamp duty rates on residential property transactions above $100 million will be increased from 4.25% to 6.5%, and the OECD's package, including global and Hong Kong minimum taxes, will be implemented for large multinational enterprise groups.
Government funds will be consolidated and optimized. Unspent balances from seed capital funds and purpose-specific funds will be redirected to the government accounts. The Bond Fund surplus and investment income from the Exchange Fund will also support infrastructure projects.
Bond issuance will be accelerated to finance infrastructure projects. The borrowing ceiling for the two bond programs will be increased from $700 billion to $900 billion, with approximately $160 billion to $220 billion in bonds issued annually over the next five years.
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