The Cabinet yesterday approved a NT$108.9 billion (US$3.56 billion) budget for the first two years of the government’s Forward-looking Infrastructure Development Program, all of which will be financed by government borrowing.

The overall budget includes NT$17.06 billion for railway projects, NT$25.67 billion for water-related projects, NT$8.12 billion for “green” energy projects, NT$16.17 billion for digital projects, NT$35.41 billion for urban and rural development, NT$1.96 billion for measures to increase the nation’s birth rate, NT$312 million for food safety and NT$4.2 billion to cultivate talent.

The budget is NT$3.6 billion less than the Cabinet’s original budget for those two years, as the budget cap has been lowered.

The first four years of the planned eight-year program —which has a total budget of NT$420 billion — are expected to increase GDP by 0.1 percent, with an increase of NT$470.5 billion in real GDP contributions and NT$506.5 billion in nominal GDP contributions, Directorate-General of Budget, Accounting and Statistics Minister Chu Tzer-ming (朱澤民) said.

With the new allocations, the government’s debt load would increase by NT$200 billion in the next fiscal year, with a predicted debt-to-GDP ratio of 33.3 percent, Chu said.

The ratio would be kept at about 33 percent until 2021, well below the maximum debt ratio of 40.6 percent, he added.

The Chinese Nationalist Party (KMT) has raised doubts about local governments’ ability to pay their portions, but Chu said there is still room for local government borrowing.

Local governments have to raise NT$225 billion to start the projects, but about NT$135 billion could be repaid with revenue from the new infrastructure, he said.

That would reduce the borrowing costs to NT$90 billion and there is still a NT$600 billion buffer before local government borrowing would reach its maximum, he said.

“Green” energy and digital infrastructure projects were expected to raise NT$1.77 trillion in public and private investment over the eight-year course of the program, officials have said.

That goal is attainable even though the program has been divided into two four-year periods because most “green” energy and digital infrastructure projects could be completed in four years, National Development Council Minister Chen Tain-jy (陳添枝) said.

Premier Lin Chuan (林全) said the Special Act on the Forward-looking Infrastructure Development Program (前瞻基礎建設特別條例), which stipulates that annual government borrowing cannot exceed 15 percent of annual government expenditure, is the first special budget law that includes borrowing regulations to ensure financial discipline.

“This has never been done before and hopefully it [the codification of borrowing rules into a budget law] will establish a new paradigm to ensure the nation’s financial health,” Lin said.