Introduction
The World Governments Summit (WGS) 2026 has highlighted a major shift in public-sector digital transformation, revealing that global spending on artificial intelligence (AI) by local governments is projected to reach $78 billion by 2033. This rapid growth signals a new era in smart governance, where AI is becoming a core driver of efficiency, innovation, and citizen-centric services across cities worldwide.
Rising Investment in Government AI
According to a new report launched at WGS 2026, global expenditure on AI-enabled public-sector solutions stood at $12.6 billion in 2023 and is expected to grow more than sixfold over the next decade.
This surge reflects increasing demand for data-driven decision-making, automation, and smarter service delivery within local administrations.
The report, developed in partnership with Arthur D. Little, emphasizes that AI adoption at the municipal level could fundamentally transform how cities operate, from infrastructure management to citizen services.
Transforming City Management
AI technologies are already being deployed in several cities to improve operational efficiency and urban planning. Examples include:
- Automated processing of business licenses in Abu Dhabi.
- AI-powered traffic and urban management systems in Hangzhou.
- Data-driven solutions for waste management and public safety in multiple cities worldwide.
These applications demonstrate how AI can streamline government operations and address complex urban challenges such as congestion, security, and environmental sustainability.
Global Adoption Still Limited
Despite its vast potential, the report notes that widespread adoption of AI in local governments remains limited. Challenges such as high costs, data privacy concerns, regulatory gaps, and skills shortages continue to slow implementation.
In fact, only a small percentage of local authorities globally have achieved full AI implementation, highlighting the gap between technological potential and real-world deployment.
Strategic Importance for Governments
The expanding Government AI Readiness Index—now covering 193 national administrations—shows growing expectations for governments to integrate AI into public services and governance models.
As cities face rising population pressures and complex service demands, AI is increasingly viewed as a strategic tool to enhance efficiency, transparency, and sustainability in governance.
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