The financing terms for Pakistan’s Hangor-class submarine program are opaque, with the approximate $4-5 billion deal primarily financed by Chinese loans.
Pakistan is acquiring eight Chinese-built Hangor-class submarines, intended to modernise its undersea warfare capabilities. The Hangor-class submarines are part of a 2015 agreement between Pakistan and China, with four being built in Wuhan and four under construction at Karachi Shipyard & Engineering Works (KSEW).
However, the financing terms for Pakistan’s Hangor-class submarine program are opaque, with the approximate $4-5 billion deal primarily financed by Chinese loans. Details about the loan’s interest rates, repayment schedules, and collateral are not publicly disclosed, which raises concerns about transparency and potential hidden leverage for China.
The opacity of the financing, coupled with reliance on Chinese technology and a technology transfer that is more assembly-focused than true transfer, has led to scepticism and concern among observers and strategists regarding long-term financial and geopolitical implications for Pakistan.
The Hangor deal is largely financed by Chinese loans. But the Pakistani government has not officially disclosed the total cost or the financial terms of the contract with China, creating a lack of transparency. The significant financial dependence on China for the submarine programme is seen by some as a form of financial leverage, potentially giving Beijing control over Pakistan’s naval development through bureaucratic means.
The reliance on Chinese financing is inter-linked with China’s role in the technology transfer, where the primary role of the KS&EW is assembly rather than independent construction. The lack of public information surrounding the financing raises questions about the accountability and long-term financial burden on Pakistan. Opaque loan terms can transform the acquisition of military hardware into a financial anchor, potentially impacting Pakistan’s strategic autonomy and deepening its financial reliance on China.
Opaque financing for Pakistan’s Hangor-class submarines, primarily through Chinese loans, deepens the country’s fiscal crisis due to hidden costs, the risk of deferred payments, and a growing dependence on Beijing. These loans, carrying high interest and short windows, transform the multi-billion-dollar deal into a financial anchor, with future maintenance and material replacement entangled in a debt-creditor relationship, effectively giving China geopolitical leverage.
Beyond the initial price tag, each submarine carries embedded leverage for China. Costs for spare parts, software updates, and hull work can become entangled in the debt relationship, with Beijing potentially controlling the pace of delivery and billing.
Opaque terms can allow China to extend billing schedules or delay repair queues, providing a form of leverage. This mirrors the experience of Thailand’s S26T submarine program, which suffered significant delays due to contractual issues and China’s insistence on local testing for its CHD-620 engines, the same type used in the Hangor class.
Moreover, the Hangor-class submarines, built by China for Pakistan, face potential weaknesses against Indian anti-submarine warfare capabilities, particularly in areas like underwater endurance and stealth due to their reliance on older technology compared to some Indian submarine platforms.
The growing Anti-Submarine Warfare (ASW) dominance of the Indian Navy, equipped with advanced sonar systems, maritime patrol aircraft, and hunter-killer submarines, is rendering Pakistan’s undersea fleet increasingly vulnerable and outdated.
In such a situation, it does not make sense for Pakistan to invest so much in these types of military hardware, whose efficacy during a conflict is seriously doubtful.
Pakistan is already under a mountain of debt, amounting to Pakistan’s total debt was PNR 76.01 trillion (approximately USD 180 billion) by the end of March 2025, which includes domestic debt of PNR 51.52 trillion and external debt of PNR 24.49 trillion (USD 87.4 billion), according to the Pakistan Economic Survey. Most of the borrowings are getting channelised towards modernising the armed forces, whereas the common citizens of Pakistan are fighting for survival.
Pakistan’s financing paradox is clear. Since July 2023, Islamabad has received USD 4.5 billion in IMF disbursements. These tranches were tied to tough pre-conditions—subsidy cuts, tax hikes, and cumulative 45% electricity tariff increases between 2023 and 2025. Citizens endured austerity to keep reserves afloat.
Yet large chunks of foreign exchange are earmarked for Hangor payments to Chinese yards. The IMF props up reserves; the submarines drain them. It has also been noted that defence imports add pressure to reserves and magnify rupee risks. Depreciation inflates local-currency costs of foreign contracts, worsening fiscal strain. It will do a world of good for Pakistan to revive its economy rather than crushing its citizens under a mountain of debt.