After many months of contention over Taiwan’s government spending, the pan-Blue camp seemed to finally relent on August 14. The budget was finally passed on that day – 266 days past the deadline, and almost one year after the Executive Yuan originally submitted the budget for consideration on August 29, 2025.

The eventual passage of the budget occurred amid growing concern that defense spending was being held up – especially funding for drones. 

The Kuomintang (KMT) – which currently holds the majority in the legislature along with its third-party ally, the Taiwan People’s Party (TPP) – had previously suggested that it would cut funding or impose funding freezes on drone spending, alleging that the Democratic Progressive Party (DPP) was using the drone industry to funnel money to untested companies and line its pockets. Reports at the time in pan-Green media outlets also suggested that China hoped to see drone spending blocked and had directed United Front Work Departments to coordinate to influence public opinion in Taiwan. 

However, the KMT seemed to suddenly reverse course after an article in The Economist accused the party of failing to protect Taiwan’s democracy out of the political selfishness of its politicians.

Still, the budget that was passed had substantial cuts, including with regard to drone spending. The cuts amounted to 1.7 percent of the Executive Yuan’s original budget, which KMT legislative caucus leader Fu Kun-chi framed as a generous gesture. By comparison, in 2025, when the KMT instituted the largest set of budget cuts in Taiwanese political history – freezing or cutting one-third of the government’s operational expenses – this was around 3 percent of the proposed budget. 

When it comes to drone funding, the Lai administration originally intended to pass a special budget of NT$210 billion (US$6.6 billion) that would have been used to purchase 1,446 coastal reconnaissance drones, 208,200 coastal attack drones, and 1,320 unmanned surface vessels. The budget would have run from August 2026 through the end of 2031, with spending of NT$42.1 billion per year. Importantly, that would have come on top of NT$31 billion budgeted by the military for unmanned systems as part of its existing budget. 

The budget passed by the KMT allocated NT$240 billion in funding for all purchases of unmanned systems, which will be under the budget for the central government rather than as a separate special budget. Spending would be limited to a cap of NT$40 billion per year, which would be subject to regulatory approval. In other words, the KMT has reduced the budget for military spending on drones from around NT$73 billion a year to NT$40 billion – a 45 percent reduction.

The KMT intends to exert control over the process for drone development through annual approval. Industry experts have warned that this could be detrimental for the long-term development of Taiwan’s drone industry. Building up domestic drone capacity usually requires an initial injection of capital that then tapers off, rather than the same amount of funding year after year. Likewise, drone companies will have to face uncertainty, as the KMT could deny approval for funding in subsequent cycles. 

Some reports suggest that the Executive Yuan will accept the reduced drone budget nonetheless, although it is possible that it may still attempt to fight for additional funding. 

The KMT has sought to deny funding to defense initiatives undertaken by the Tsai and Lai administrations, claiming that effectiveness has not yet been proven. Beyond drones, under the current budget, the KMT has moved to freeze NT$11.9 billion in funding for Taiwan’s domestic submarine program – for the completion of a planned fleet of seven submarines – until after testing for the first submarine of the fleet, the Hai Kun. 

Besides defense programs, the new budget brings other cuts. All media and publicity budgets were slashed by half, while all special operational expenses were but by 60 percent. It is expected that cuts to media and publicity budgets will impact the ability of the government to advertise social services, conduct outreach about civil resilience, and even recruit soldiers. 

A number of key ministries will see special operational expenses slashed to zero. This includes the Ministry of Foreign Affairs, Ministry of National Defense, Ministry of Economic Affairs, Ministry of Finance, Ministry of Transportation and Communication, Ministry of Justice, Ministry of Labor, Ministry of Digital Affairs, and Ministry of Culture. Likewise, the National Development Council, National Communications Commission, Mainland Affairs Council, Overseas Community Affairs Council, Ocean Affairs Council, and Ministry of Personnel will also have special operational expenses reduced to zero. 

Funding for international exchanges has proven to be another target. Overseas travel and foreign training budgets were cut by 70 percent for the National Development Council, National Communications Commission, Mainland Affairs Council (MAC), Overseas Community Affairs Council, and the Control Yuan. Such funding was cut by 10 percent for the Ministry of Foreign Affairs, Ministry of National Defense, National Security Council, National Science and Technology Council, National Police Agency, National Fire Agency, Ministry of Sports, National Immigration Agency, and Coast Guard Administration.

The Ministry of Culture has seen its budget cut by NT$1 billion and NT$386 million is frozen. Another NT$21.85 million was cut, and NT$300 million was frozen for Public Television Services, which includes English-language Taiwan Plus. The National Communications Commission, whose operation is already frozen because the KMT refuses to confirm new nominees to it, will see a 56 percent funding cut. The oversight body of the Control Yuan, which includes the National Human Rights Commission, will see NT$295 million in cuts. 

Some cuts target specific politicians that the KMT dislikes. President Lai Ching-te has seen his annual discretionary budget of NT$30 million cut by one-third to NT$20 million, the remainder of which was then frozen. The annual discretionary budget is usually used for disaster relief funding. Premier Cho Jung-tai has also had his salary frozen for September to December 2026. 

With its discretionary funding frozen, the Presidential Office stated that it had to cancel mooncake orders from organizations that hold workshops for individuals with intellectual disabilities. That lead to criticisms from Taichung mayor Lu Shiow-yen of the KMT, who claimed that the Presidential Office was attempting to manipulate public opinion through canceling the orders. Lu said that the Taichung mayoral administration would step in to pay for the mooncakes. Later on, KMT legislative caucus leader Fu Kun-chi apologized and stated that the legislature would cover the cost. 

It seems that large-scale budget cuts are par for the course with the KMT in control of the legislature. The KMT clearly intends to throw a wrench into initiatives of the Lai administration through cuts or freezes. While the KMT’s budget cuts provoked significant outrage last year in the form of the Great Recall Movement – the historic but ultimately unsuccessful attempt to recall all KMT legislators – any anger this year is likely to be channeled toward local elections in November. That being said, the local elections are for positions such as mayor and city/county councilors and will not impact the composition of the legislature. The results will not have any direct impact on future budgeting decisions by the Legislative Yuan. 

It is to be seen if there are similar delays in passing the budget next year. The Executive Yuan submitted its 2027 budget on August 19. With more than NT$1 trillion earmarked for defense for the first time ever, this budget may see similar contentions. But the DPP seems to be trying to head off criticisms – next year’s budget marks the first time in 78 years that the government budget involves substantive zero net borrowing.