Taking a sudden U-Turn from its previous stand, the Pakistani government has decided to move away from the ‘interest-based’ banking system. On Wednesday, Pakistan’s Finance Minister Ishaq Dhar made this announcement that the government has planned to implement the Islamic law of an interest-free banking system by 2027.
Background
In 1991, the Federal Shariat Court (FSC) ruled that the interest-based banking system was against the teachings of Islam. The FSC had set a deadline to do away with the interest-based banking system by 1992. However, the then Nawaz Sharif government challenged the decision of the FSC in the Supreme Court.
The Apex Court suspended the implementation of the FSC’s orders and sent the matter back to the FSC for review. After more than two decades, in April of this year, the FSC ordered the government to do away with interest in Pakistan’s banking system by the end of 2027.
According to the FSC, charging any money on the principal amount was Riba (unjust), which was barred according to the Quran.
Following the orders passed by the FSC in April, five commercial banks, including the government-owned State Bank of Pakistan and National Bank of Pakistan, challenged the FSC’s rulings in the Apex Court.
U-Turn by the government
On November 9, Pakistan’s Finance Minister said, “With the permission of the Prime Minister and consultation with the State Bank of Pakistan’s (SBP) governor, I am announcing on the behalf of Federal government that the SBP and National Bank of Pakistan will withdraw their appeals from the Supreme Court and our government will fully try to implement an Islamic system as quickly as possible.”
“Because this is ordained in the Holy Quran, and I believe the barometer of our decisions is the Quran and Sunnah,” he added.
Furthermore, he admitted that the government is aware of the challenges that it would face in implementing the changes in Pakistan’s financial and banking system. However, he also assured that the government is fully committed to implementing the FSC’s orders as soon as possible.
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