Taiwan leaders face pushback on massive defense budget mechanics

NEW TAIPEI CITY, Taiwan – Taiwan’s government may be facing a fight to find the funding to pay for planned military spending, including announced arms purchases from the United States.

Taipei said last month it would buy a large $11.1 billion arms package from the United States including HIMARS rocket systems. A month earlier Taiwanese President William Lai announced a roughly NT$1.25 trillion ($39.5 billion) special defense budget to start now and last through 2033 on top of routine annual military expenditures.

Taiwan’s government, though, may need to fight to find funding because of the sheer size of the expense and bottlenecks in the legislature, the opposition-controlled Legislative Yuan.

Opposition parties blocked a special defense budget during a Jan. 9 session, calling it inconsistent with the law, with some opponents preferring raising only military pay and pensions via special appropriations.

“The money is technically raiseable because Taiwan has the fiscal capacity, but the real constraints are political patience and interparty bargaining,” said Hu Jin-li, a professor with the Institute of Business and Management at National Yang Ming Chiao Tung University in Taipei.

Taiwanese Premier Cho Jung-tai said in a Jan. 8 statement that an earlier legislative blockade of the special budget had affected the release of NT$75.2 billion ($2.38 billion) earmarked for deterrence and asymmetric warfare capabilities, among other items. The full special budget is also designed to cover precision fires, long-range strike and missile defense.

On Jan. 15, Deputy Defense Minister Hsu Szu-chien – responding to one lawmaker’s concern – said the special budget sum reserved for buying U.S. arms would equal about NT$900 billion, with NT$300 billion for domestic military spending.

Few countries apart from the U.S. sell arms to Taiwan for fear of a backlash from China, which protests almost every sale of weaponry announced by Washington. China’s military budget was set at $246 billion last year compared to Taiwan’s $31.2 billion.

About 54% of Taiwanese citizens take a dim view of lawmakers slow-walking the special defense fund, while 30.2% view the process more positively, according to a Dec. 22 poll by the Taiwan Public Opinion Foundation.

Without approval of the special budget, analysts said, Taiwan’s government must shift money from other departments at the risk of upsetting their beneficiaries or sell bonds to raise money.

Taiwan has previously paid for weapons, from at home and abroad, by supplementing its regular defense spending.

“If the [Taiwanese] legislature does not approve a defense budget increase, the government can shift already-approved defense funds from one priority to another, but this obviously creates tradeoffs that can quickly become unsustainable,” said Denny Roy, a senior fellow at the East-West Center think tank in Hawaii.

Lai’s government may eventually reallocate funds from education or social welfare, said Chen Yi-fan, assistant professor in the Diplomacy and International Relations Department at Taiwan’s Tamkang University.

“Big, visible cuts to social programs are politically toxic, especially with demographic pressures and cost of living concerns,” Hu said. “Therefore, soft budget reallocation – slower growth, delayed projects, tighter capital spending – should be more likely rather than headlines like ‘We cut X to fund weapons.’”

Meanwhile. borrowing is the “most probable way” in funding more defense, Chen said. “Taiwan has good financial discipline, so there’s room for the government’s borrowing.”

Fitch Ratings said in August that Taiwan had a “substantial net external creditor position, [a] record of prudent fiscal management and a favorable business environment,” earning the island an AA rating with a “stable” outlook. Taiwan also ran a tax surplus in 2024.