The BGA Taiwan Team, led by Senior Adviser Rupert Hammond-Chambers, wrote a client update on Taiwan’s 2025 defense budget. 

Context 

  • Taiwan’s 2025 defense budget of NT$647 billion ($20.2 billion) represents a historic financial high, increasing by approximately NT$40 billion ($1.3 billion) from the previous year. This increase primarily reflects the peak payment period for several major military projects, concentrated between 2025 and 2027.  
  • Key budget allocations included military procurement, personnel expenditures and maintenance. Two special budgets are also included: one for the procurement of F-16V fighter jets from the United States, and the other for the acquisition of domestically produced missiles and drones. Together, these two special budgets amount to approximately NT$90.4 billion ($2.8 billion) for the coming year. 

Significance 

  • Despite the increase in defense spending, its proportion of the central government budget has declined this past year. The Ministry of National Defense’s 2025 annual budget represents only 14.9 percent of the total central government budget, slightly down from 15 percent this year and marking a new low since 2019. Compared to the 16.3 percent share in 2019, this nearly 1.3 percent reduction reflects that while Taiwan’s gross defense spending has grown, its proportion relative to the government’s total budget is more limited.  
  • The proposed 2025 budget by the Lai Ching-te administration is currently facing opposition from the minority parties, resulting in a stalled review process. This delay makes it difficult to predict when a consensus might be reached to advance the budget’s review. However, whether these budget items will indeed be blocked by the opposition depends on the extent of cooperation between the two opposition parties.  

Implications 

  • Determining whether Taiwan is committed to a substantial long-term defense budget increase will require monitoring for new military initiatives. Currently, aside from the large-scale indigenous submarine production, no other significant procurement plans have been disclosed. Much of this also depends on U.S. willingness to continue approving new arms sales beyond maintenance, repair and ammunition.  
  • Any reduction in spending will be viewed both through the political prism domestically as well as through relations with the United States. With the two special budgets slated to expire in 2026 and 2027 respectively, Taiwan’s executive and legislative branches will seek ways to continue to grow gross defense spending in the coming years to meet the threat posed by the Chinese military and the Chinese Communist Party. 

We will continue to keep you updated on developments in Taiwan as they occur. If you have any comments or questions, please contact BGA Taiwan Senior Adviser Rupert Hammond-Chambers at rupertjhc@bowergroupasia.com

Best regards, 

BGA Taiwan Team