Taiwan’s Cabinet is expected to approve next year’s central government budget on August 20, with defence spending projected to exceed NT$1.1 trillion (US$34.07 billion) and a further NT$240 billion earmarked for a special budget, according to government sources cited yesterday.
The proposed budget would mark a significant expansion in public spending. Central government revenue is expected to reach NT$3.8 trillion next year, an increase of 35.7 percent from this year’s budget, while expenditure would exceed NT$3.6 trillion, representing a 20 percent increase. Both figures would establish new records, the sources said.
Despite the increase in spending, the government is not expected to need to borrow next year, including to meet debt repayments. The balance between projected revenue and expenditure would therefore allow the government to finance the expanded budget without additional borrowing, according to the sources.
The increased fiscal resources would support higher spending on technology, major public infrastructure projects and social welfare programmes, while defence expenditure would also reach a record level.
Under NATO accounting standards, Taiwan’s defence budget this year stood at NT$949.5 billion. That figure includes retirement benefits paid by the Veterans Affairs Council (VAC) and spending by the Coast Guard Administration (CGA). Although the Legislative Yuan has yet to approve this year’s overall budget, analysts said next year’s defence spending is expected to exceed NT$1 trillion for the first time and surpass NT$1.1 trillion when calculated according to NATO standards.
Under the regular government budget, the Ministry of National Defense would receive more than NT$700 billion next year. The CGA would receive more than NT$27 billion, while the VAC would receive more than NT$100 billion. Combined, the three agencies would receive nearly NT$850 billion, representing an increase of 22 percent from the NT$697.3 billion allocated this year.
The proposed NT$240 billion special budget would provide additional funding for defence-related programmes. Procurement programmes for new fighter jets and enhanced naval and air capabilities expired this year, and the special budget is expected to include funding for such programmes.
The special budget would also encompass measures under the Special Act for Strengthening Economic, Social and National Security Resilience in Response to International Circumstances and the Special Statute for the Procurement of Defense Resilience and Asymmetric Combat Capability Program, both of which have been approved by the Legislative Yuan. Funding would also be allocated for uncrewed vehicles.
The Executive Yuan has proposed a draft special act covering the procurement of domestically developed uncrewed vehicles, although the legislation still requires approval from the Legislative Yuan.
The scale of next year’s defence allocation will also determine whether Taiwan reaches the equivalent of 3 percent of gross domestic product under NATO accounting standards. When this year’s budget was prepared last year, calculations were based on an estimated GDP of NT$28.6 trillion. Defence spending under that calculation represented 3.32 percent of GDP.
Taiwan’s economic growth has since pushed the estimated size of this year’s economy to NT$33.5 trillion. As a result, defence spending would need to reach about NT$1 trillion to meet the 3 percent benchmark, according to the sources. With this year’s defence budget at NT$949.5 billion, the target is unlikely to be reached without additional allocations.
The Executive Yuan had originally proposed NT$1.25 trillion in special defence procurement over eight years, but opposition parties reduced the amount to NT$780 billion. Consequently, this year’s defence spending is unlikely to reach 3 percent of GDP, the sources said.
The Directorate-General of Budget, Accounting and Statistics is expected to release its latest GDP forecast this week. If the economy grows by as much as 10 percent to NT$36.8 trillion, the sharp increase in defence spending next year would push the figure above 3 percent of GDP, even without the proposed special act for uncrewed vehicles.
