Lai's proposal was stalled for two months as lawmakers from the opposition Kuomintang (KMT) and Taiwan People's Party (TPP), which together control parliament, refused to consider it without concessions from the government.

The TPP caucus has agreed to send the government's version of the special legislation to committee for joint review, the party said in a statement.

Parliament is currently in recess and will resume on February 24.

As well as the government's version, lawmakers will also consider the TPP's stripped-down version of the defence bill that allocates $12.6 billion for military purchases.

TPP's announcement came after Lai on Wednesday warned that Taiwan could be a "rupture in Indo-Pacific peace and stability" if the special defence budget was not passed.

"We hope that, given the increasingly complex regional situation , with China's threat growing more serious, Taiwan's defence budget must pass smoothly," Lai said.

Taiwan has spent billions of dollars upgrading its military in the past decade, but is under intense US pressure to do more to protect itself against the growing threat from China, which claims the island is part of its territory and has not ruled out using force to annex it.

Several US senators were openly critical of the KMT for blocking the special defence budget, and Senator Dan Sullivan warned in a post on X that "short-changing Taiwan's defence to kowtow to the CPP is playing with fire".

Lai, whose Democratic Progressive Party (DPP) lost its parliamentary majority in elections that swept him to power in 2024, has vowed to increase defence spending to more than three percent of GDP this year.

DPP caucus chief Chung Chia-pin said with TPP's support, the special defence budget could finally move forward for a committee review in the next parliamentary session.

"Strengthening national defence is a shared expectation across party lines. We are pleased that the TPP is willing to join us in conducting a joint review of the bill," he told AFP.

"We will make it a priority bill in the next session."

KMT spokesman and lawmaker Niu Hsu-ting said the party's priority is to "integrate" its own defence spending plan with TPP's version.

"The KMT's version will also focus on guarantees including requiring that procurement contracts with the US specify delivery timelines and clearly state that our country is listed within the priority circle," he told AFP.

"Once a version is finalised, we will consult further with the TPP."