Taiwan proposes record NT$1.12 trillion defense budget for 2027 to top 3% of GDP

Record military spending plans

Taiwan's government will propose a defense budget exceeding NT$1 trillion for the first time in 2027, President Lai Ching-te confirmed on Monday. Total military spending, combining the regular annual budget and special allocations, is planned to reach NT$1.1225 trillion. The proposed figure represents an increase of 16% over previous government plans and will account for more than 3% of Taiwan's gross domestic product. In the 2026 draft budget, defense spending was set at NT$949.5 billion, making the new proposal an increase of roughly 18% under that baseline. Under pressure from the United States, the administration has set a longer-term target to raise defense expenditure to 5% of gross domestic product by 2030. The Executive Yuan will formally present the comprehensive 2027 budget on Thursday, August 20, detailing specific allocations across defense sectors.

Domestic weapons and regional deterrence

The planned spending increase follows persistent military operations by China around Taiwan, which claims the island of 23 million people as its territory and has threatened annexation. Beijing has planned military expenditures of 1,909.6 billion yuan (approximately $276.8 billion), an increase of around 7%. In response to regional pressure, Taiwan held its largest military drills in early August to test defensive readiness. President Lai described the expanded budget as a necessary step to deter aggression and maintain regional stability.

Investing in defence is investing in peace; we will continue to build a more solid defence force to maintain peace and stability in the Taiwan Strait and the region.

Military modernization plans emphasize asymmetric warfare, including the production of domestic submarines and indigenous uncrewed aerial vehicles. The administration is also funding the "T-Dome" air defense initiative. At the same time, Taiwan continues to await deliveries for $14 billion in pending United States arms purchases.

Legislative scrutiny and budget disputes

Passing the 2027 defense proposal requires support in a divided parliament where opposition parties hold a legislative majority. The Kuomintang and the Taiwan People's Party approved the delayed 2026 central government budget on Friday, August 14, concluding an eight-month legislative impasse. Opposition leaders maintain they will not write blank cheques for the government and intend to evaluate proposals strictly on principles of professionalism and reasonableness. In May 2026, lawmakers passed a $25 billion special defense package after removing approximately $15 billion originally intended for uncrewed aerial systems.

Premier Cho Jung-tai and the Executive Yuan plan to restore the full NT$1.25 trillion special defense budget across the 2027 central budget and an upcoming supplementary measure. Lawmakers are currently reviewing competing proposals for uncrewed aerial vehicle funding.

Total expenditure and economic dividend

The defense allocation is part of an overall government budget of NT$3.9 trillion proposed for 2027, more than double the level recorded in 2016. Taiwan's economy has expanded rapidly, experiencing its strongest growth in 40 years driven by artificial intelligence technology. To distribute economic gains, the 2027 draft budget allocates a cash payment of NT$10,000 for each resident.

The accompanying supplementary budget directs funding toward civil sector subsidies, including assistance for fuel, airlines, intercity bus operators, taxis, and fertilizer. It also provides pay increases for military personnel, civil servants, and teachers, alongside disaster reconstruction funding for Hualien County following the breach of a barrier lake on the Mataian River.