Hong Kong’s finance chief will deliver his “most challenging” budget yet on Wednesday morning, analysts have said, pointing to the need for tempering wide-ranging expectations while cautioning the public against counting on quick fixes to the city’s economic woes. While the predicted deficit of nearly HK$100 billion (US$12.86 billion) has made headlines in recent weeks, the observers said on Tuesday all eyes should be on measures to balance the books over the coming years rather than expecting overnight solutions. The bigger task was to ensure the deficit did not become a structural problem, they indicated. Financial Secretary Paul Chan Mo-po should focus on the bigger picture and boost public confidence in the economy for the medium and long-term, they added. Gary Ng Cheuk-yan, a senior economist at Natixis Corporate and Investment Bank, described this year’s budget as Chan’s “most challenging” one. “Policies should be about restoring the government’s financial health and the best way to do it would be to ensure Hong Kong’s growing momentum, so income tax [and other sources of revenue] would return,” he said. He cautioned it would take years to see the benefits of some measures such as a review of the civil service establishment. The Post earlier reported the government might cap the number of HK$2 subsidised trips for the elderly at 240 a month, and an insider said on Tuesday that despite claims the change was merely an incremental move, the government was set on proceeding. “We must see it as a first step towards working out a more fiscally sustainable plan,” the source told the Post. Introduced in 2012, the scheme allows people aged 60 or above, and those with disabilities, to pay only HK$2 per trip on public transport, with an aim to encourage them to participate more in community activities. With the total reimbursement for transport companies increasing by more than 200 per cent to HK$3.9 billion in 2023-24 over the past five years and expected to reach HK$6 billion for the current financial year, the policy is now deemed unsustainable. Political parties have also pressed the government to freeze the pay of civil servants and cut its size from 173,000, as the sector accounts for about a fourth of annual government expenditure. Sources told the Post earlier that departments would further cut the number of contract staff. Sources said on Tuesday that some form of a pay freeze would be adopted by the government but stopped short of revealing whether it would be across the board or only target senior workers. On expanding revenue sources, the Post has also learned the finance chief will consider legalising basketball betting to generate a new source of duty, an expansion of gambling the Jockey Club has pursued for more than a year. While the plan would bring in billions of dollars in taxes, its success would hinge on society’s receptiveness to the move. Authorities are also expected to continue issuing bonds to finance public projects, with more proceeds going into the capital works reserve fund, as the city’s debt level at about 9.3 per cent is still far below that of other advanced economies. But raising charges relating to people’s livelihoods would require substantial political will. The Post, for example, has learned the budget is unlikely to contain concrete details on the government’s plan to increase public hospital fees. Chan hinted in his official blog on Sunday that he would still invest in the future, especially in technological development, to equip the city so it could face a “complex and ever-changing” international environment. A source told the Post the government would also reach out to big technology companies to help schools and universities embrace a curriculum more focused on artificial intelligence (AI). But some infrastructure projects would be reprioritised, especially the less important ones calling for upgrading or beautifying existing facilities. It remains to be seen whether longer-term megaprojects such as building three artificial islands off Lantau, will be further delayed. Lawmaker Holden Chow Ho-ding, a member of the Legislative Council’s economic development panel and city’s biggest political party, the Democratic Alliance for the Betterment and Progress of Hong Kong, said he believed the property market would eventually bounce back, but it would take time for a return to its previous healthy level. “When facing a budget deficit, we need to be aware of the root of the problem,” he said, adding the city had lost its main source of income from land sales. Halting some construction projects with no immediate need was preferred to making deep cuts to welfare for the elderly, he added. The government should also adopt AI technologies to save manpower, Chow said, adding: “We have invested resources in our innovative and tech industries, and I am confident that we will reap the benefits.” Lawmaker Chan Siu-hung noted there were confidence issues regarding land sales, which formed a certain part of the government’s income. “Future infrastructure projects cannot be suspended or reduced,” he said. To boost public confidence, the government could issue bonds to begin infrastructure development, demonstrating authorities were actively working on future projects, he said. The lawmaker added he was not worried the deficit would become a structural problem, as Hong Kong’s economy was externally oriented.