Pakistan gets new Hangor submarine from China. But does it really have money to pay Beijing?

Does Pakistan have money to buy submarines?

China has sent a second submarine to its ‘iron brother.’

The two countries made a deal for Beijing to deliver eight submarines.

The development comes after China in December became Islamabad’s largest creditor. Cash-strapped Pakistan has been struggling with its finances for years.

But what happened? And does Pakistan really have the money to pay China?

Let’s take a closer look:

What happened?

China sent Pakistan another submarine as part of its plan to beef up the navy of its all-weather ally to back its growing presence in the Arabian Sea and the Indian Ocean.

The Hangor-class submarine has state-of-the-art weapons and sensors.

It is believed to be an export version of China’s 039A submarine, with a crew of 38 plus eight spaces for special forces troops and equipped with torpedoes and anti-ship missiles.

Pakistan has used submarines in the past to confront India as part of their land wars over disputed territory in the north.

The submarine was launched in Wuhan, China’s Hubei Province.

As per Daily Excelsior, the diesel-electric vessel set off on Thursday from China Shipbuilding Industry Corporation’s shipyard in Wuhan.

The overall deal between the two nations is estimated at around $5 billion.

Under the agreement, four of the eight Hangor-class submarines will be built in China, while the remaining will be constructed in Karachi under a transfer of technology program.

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These vessels will be built by Karachi Shipyard and Engineering Works, as per Daily Excelsior.

The submarines will be fitted with cutting-edge weapons and sensors, enabling them to engage targets at standoff ranges.

As per Global Times, the previous submarine was launched in April 2024.

The launch ceremony, held at Wuchang Shipbuilding Industry Group’s (WSIG) Shuangliu Base, was attended by Pakistan Navy chief Admiral Naveed Ashraf.

Ashraf at the time emphasised the importance of maritime security under the prevailing geo-strategic environment and the navy’s resolve to ensure regional peace and stability.

The Navy chief also underscored that the Hangor-class S/M Project will “add a new dimension to the all-weather Pak-China friendship and shows strong military cooperation between two countries”.

China earlier gave Pakistan four modern naval frigates in an effort to boost its navy.

Last year, the Pakistan Navy inducted two newly built Chinese Type 054 A/P frigates.

Both countries had inked the contract for four multi-role frigates back in 2018. The first and second ships PNS TUGHRIL and PNS TAIMUR joined the PN fleet in 2022.

This comes in the backdrop of the Chinese navy’s steady expansion in the Arabian Sea where it is developing the Gwadar port in Balochistan.

Global Times quoted Vice Admiral Ovais Ahmed Bilgrami, a vice chief of the Naval Staff of the Pakistan Navy, as saying that the submarine would play a key role in keeping the balance of power and maritime order in the region.

Chief of the Naval Staff of the Pakistan Navy Admiral Naveed Ashraf in January told the newspaper these submarines will significantly enhance Pakistan’s naval capabilities by increasing stealth, maneuverability and firepower.

This will let the Pakistan Navy carry out a wide range of operations effectively, Ashraf added.

“The project is proceeding as per the timeline. We expect that these submarines will join the Pakistan Navy fleet very soon,” Ashraf stated.

A Chinese expert told the newspaper that the new submarine has a strong comprehensive combat capability to become a mainstay for the Pakistan Navy.

Zhang Junshe, a Chinese military affairs expert, told the Global Times that Hangor-class submarines possess strong underwater combat capabilities and are equipped with an air-independent propulsion system that will give the boat strong, sustained stealth capability, manoeuvrability and endurance.

Its firepower includes torpedoes, anti-ship missiles and mine-laying capabilities, along with advanced underwater detection systems, he said.

Prohibitions on dual military and civilian use of technology by European nations that make diesel submarines has left China Pakistan’s best option for modern military equipment.

According to a recent report by the Stockholm International Peace Research Institute (SIPRI), China has supplied 81 per cent of Pakistan’s advanced military systems in the past five years, making Pakistan its biggest arms importer.

Pakistan’s military acquisitions amounted to 63 per cent of China’s total arms exports, with a total value of $5.28 billion in the last five years.

Pakistan bought more advanced and diverse systems from China from 2020 to 2024, such as long-range reconnaissance drones and Type 054A guided-missile frigates, the SIPRI report said.

Some of Pakistan’s key orders in the past five years include the country’s first spy ship, the Rizwan, more than 600 VT-4 battle tanks, and 36 J-10CE 4.5-generation fighters, according to the SIPRI database.

China supplied the first delivery of multirole J-10CE fighter jets to Pakistan Air Force in 2022, adding to its JF-17 fighters jointly manufactured by both countries.

The fourth-generation JF-17 was jointly developed by Pakistan Aeronautical Complex and China’s Chengdu Aircraft Industry Group, including the Block III version featuring an active electronically scanned array radar, which was inducted by the Pakistan Air Force in 2023.

Song Zhongping, a military commentator and former instructor of the Chinese military, told the Hong Kong-based South China Morning Post that China might also export its fifth-generation fighter jet, the J-35 the stealth multirole fighter, “if Pakistan requests it.”

Pakistan’s shaky financial situation

Pakistan has for long been facing a fiscal crisis.

Last week, the adviser to the finance minister of Pakistan, Khurram Schehzad, said China rolled over a $2 billion loan to Pakistan.

This is significant because Beijing in December became Islamabad’s largest creditor.

Pakistan owed China around $29 billion in loans, as pe_r Dawn._

According to the newspaper, the country’s total debt in 2023 stood at $130.85 billion (excluding the IMF).

China, having made Pakistan loans totalling nearly $29 billion, is the country’s biggest creditor.

China was followed by the World Bank $23.55 billion and Asian Development Bank at $19.63 billion.

Saudi Arabia was the second largest bilateral lender with  outstanding loans of $9.16bn.

The World Bank warned of Pakistan’s weakening fiscal position amid rising debt.

Pakistan is working to strengthen its finances after securing a $7 billion International Monetary Fund bailout in September 2024.

The first installment of the loan is currently under review, and if successful, Pakistan will receive an additional $1 billion.

Securing external financing has previously been a key condition for the IMF to approve bail-out deals for the cash-strapped nation.

The South Asian nation needs to repay over $22 billion in external debt in fiscal year 2025, including nearly $13 billion in bilateral deposits, Fitch said.

Does Pakistan really have the money to pay China?

It doesn’t seem like it.

As per DW,  Prime Minister Shehbaz Sharif, last year, had written to China asking for the due date of Pakistan’s loans to be extended.

Beijing has given Pakistan billions of dollars under the Pakistan-China Economic Corridor (CPEC) – which is part of the Belt and Road Initiative.

Safiya Aftab, an Islamabad-based economist, told the outlet that the Chinese have lended Pakistan money at an interest rate of 3.7 per cent.

“These loans were given for infrastructure, which in theory is supposed to start generating returns. The main issue in my opinion is Pakistan’s poor absorption capacity. The government was not able to progress on projects according to schedule,” Aftab said.

Azeem Khalid, an expert on Chinese investment in Pakistan, said the loans “are challenging to repay due to exorbitantly high interest rates, which exceed the payment capacity of the government.”

“The more relaxations and extensions available, the better it is for Pakistan. China, aware of Pakistan’s financial struggles, often provides breathing space but occasionally leverages this debt for its interests,” Khalid added.

Kaiser Bengali, an economist, told the outlet, “The huge debt pile is crushing the economy.”

“This is getting more complex, for how long China will roll over these debts, as they have their own bottom lines for these loans in their business projects. They lend to many countries and don’t want to set a precedent of delaying and renegotiating projects as it will affect their interests,” he added.

A piece in ORF in September noted that anxieties both within Pakistan and without are rising about Islamabad being stuck in Beijing’s ‘debt-trap.’

With inputs from agencies