Taiwan Passes 2026 Budget After Months of Delays, Cuts Defense Spending

Taiwan's legislature finally passed the 2026 budget on August 14, a full 266 days past the deadline, amid growing concerns that defense spending, particularly for drones, had been held up. The delay stemmed from contention between the ruling Democratic Progressive Party (DPP) and the opposition Kuomintang (KMT), which holds a majority alongside the Taiwan People's Party (TPP). Originally, the DPP administration had proposed a special budget of NT$210 billion (US$6.6 billion) for the purchase of coastal reconnaissance drones, coastal attack drones, and unmanned surface vessels from August 2026 through the end of 2031, amounting to approximately NT$73 billion per year. The KMT had previously suggested cutting or freezing funding for drone spending, alleging the DPP was using the drone industry for financial impropriety. However, the KMT appeared to reverse course after an article in The Economist criticized the party for prioritizing political self-interest over national security. The budget that was ultimately passed allocates NT$240 billion for all unmanned systems purchases, but it will be part of the central government budget rather than a separate special budget. Spending will be capped at NT$40 billion per year, subject to regulatory approval. This represents a substantial reduction of approximately 45% from the initially proposed annual funding for drone-related military spending. The KMT intends to exert control over the drone development process through annual approval, a move that industry experts warn could be detrimental to the long-term development of Taiwan's domestic drone industry, which typically requires consistent initial capital injections. Beyond defense programs, the new budget includes significant cuts to other areas. Media and publicity budgets were slashed by half, while special operational expenses were cut by 60%. This is expected to impact the government's ability to advertise social services, conduct outreach on civil resilience, and even recruit soldiers. Many key ministries will see their special operational expenses reduced to zero, affecting their administrative functions. Funding for international exchanges has also been heavily cut, by up to 70% for some bodies, impacting diplomatic and cultural initiatives. The KMT has also sought to deny funding to defense initiatives undertaken by previous administrations, claiming unproven effectiveness. In addition to drones, NT$11.9 billion in funding for Taiwan's domestic submarine program has been frozen until testing for the first submarine, the Hai Kun, is completed. While some reports suggest the Executive Yuan will accept the reduced drone budget, the possibility of seeking additional funding remains. Information Source: The Diplomat Indonesia