The recent devaluation of the NT dollar is increasing pressure on Taiwan's weapons procurement and foreign aid programs, Chinese-language media reported yesterday.
The local currency fell to a 15-year low of NT$35.05 against the US dollar on Wednesday, having shed 5.9 percent of its value since the beginning of the year.
It rose slightly to NT$34.975 before the weekend.
In particular, a weaker NT dollar adds additional uncertainty to the proposed purchase of Kidd-class destroyers from the US, the report said. The budget for the warships has yet to be approved by the Legislative Yuan.
The payment costs for previously agreed purchases will also rise, the report said.
Taiwan's weapons purchase programs are especially vulnerable to fluctuations in the US dollar exchange rate because a majority of the weapons systems used by the Taiwan military are imported from the US, the report said.
The Ministry of Foreign Affairs' budget may shrink by NT$1.5 billion, or more than 5 percent, if the devalued NT dollar stays near the current rate for the rest of the year. The US dollar portion of this year's government budget was calculated at a rate of NT$31.5 to the US dollar and 80 percent of the foreign ministry's NT$27.9 billion expenditure for this year is to be disbursed in US dollars.
The NT dollar's dramatic devaluation in May and June is poised to put the ministry under considerable financial pressure in the second half of the year. The ministry had spent 40 percent of its annual budget by the end of June. Even though the ministry can apply for contingency funds from the Executive Yuan to fill the gap, ministry officials plan to spare the Cabinet from more cash crunches by postponing foreign aid programs and new commitments. Taiwan's severance of diplomatic ties with Macedonia has fortunately freed up tens of millions of dollars for use in other countries, the officials said.
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