Taiwan’s government is grappling with significant challenges in securing funding for its ambitious defense budget, which includes a substantial arms package from the United States. In December 2023, Taipei announced a proposed arms deal valued at approximately $11.1 billion, featuring advanced HIMARS rocket systems. This initiative follows Taiwanese President William Lai’s declaration of a remarkable NT$1.25 trillion (about $39.5 billion) special defense budget, intended to cover military expenditures from now until 2033.
The aspiration for this sizable budget faces substantial roadblocks in the opposition-controlled Legislative Yuan. During a session on January 9, opposition parties successfully blocked the special defense budget, arguing that it did not align with existing laws. Some lawmakers advocate for a focus on military pay and pensions instead of broad defense spending. As Hu Jin-li, a professor at the National Yang Ming Chiao Tung University, noted, “The money is technically raiseable because Taiwan has the fiscal capacity, but the real constraints are political patience and interparty bargaining.”
Taiwanese Premier Cho Jung-tai highlighted the implications of the legislative blockade, which has delayed the release of NT$75.2 billion (around $2.38 billion) allocated for critical deterrence and asymmetric warfare capabilities. The proposed budget aims to enhance Taiwan’s long-range strike capabilities and missile defense systems. On January 15, Deputy Defense Minister Hsu Szu-chien revealed that approximately NT$900 billion would be earmarked for U.S. arms purchases, with an additional NT$300 billion designated for domestic military initiatives.
For Taiwan, acquiring arms is fraught with complications, as few nations apart from the U.S. are willing to supply weapons due to potential backlash from China. In 2023, China allocated a military budget of $246 billion, dwarfing Taiwan’s budget of $31.2 billion. Public sentiment reflects growing frustration over legislative delays, with approximately 54% of Taiwanese citizens expressing dissatisfaction with the slow progress on the special defense fund, according to a December poll by the Taiwan Public Opinion Foundation.
Analysts warn that without legislative approval for the special budget, Taiwan may have to divert funds from other governmental departments, risking backlash from various sectors. As Denny Roy, a senior fellow at the East-West Center, articulated, “If the 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.”
Experts suggest that reallocating funds from essential programs such as education or social welfare could be politically damaging. “Big, visible cuts to social programs are politically toxic, especially with demographic pressures and cost of living concerns,” noted Hu. In this context, a gradual approach to budget reallocation—characterized by slower growth and deferred projects—may be more feasible than direct cuts to social funding.
Moreover, borrowing is viewed as the “most probable way” to finance the increased defense spending. Chen Yi-fan, an assistant professor at Tamkang University, maintains that Taiwan’s sound financial practices allow for room to borrow. In August, Fitch Ratings affirmed Taiwan’s creditworthiness, citing its substantial net external creditor position and a record of prudent fiscal management, assigning the island an AA rating with a “stable” outlook.
Taiwan’s pursuit of a robust defense strategy underscores the complex interplay of domestic politics and international relations, particularly in the face of rising tensions with China. As the government navigates these challenges, the outcome of the special defense budget remains pivotal for Taiwan’s security posture in an increasingly volatile regional landscape.
