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Federal Shariat Court gives govt 5 years to implement Islamic, interest-free banking system

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  • Federal Shariat Court says economic system of an Islamic country like Pakistan should be interest-free.
  • Court directs govt to immediately remove word interest from all banking and other laws.
  • Says transactions with international institutions, including IMF and World Bank, should be made interest free.

The Federal Shariat Court on Thursday gave the government five years to implement an Islamic and interest-free banking system in the country, as the economic system of an Islamic country like Pakistan should be free of interest.

Justice Dr Syed Muhammad Anwer read out the verdict that was reserved by a three-member bench of the Federal Shariat Court. The court had reserved its verdict on April 12 after hearing all the parties and the attorney general.

The verdict stated that abolition of riba is fundamental for an Islamic system, adding that any transaction involving riba is “wrong”.

“The abolition of riba and its prevention is in accordance with Islam. The interest taken in any case, including debt, falls into riba. Riba is completely forbidden in Islam,” said the Federal Shariat Court.

The Shariat court’s verdict also stated that interest given on external and internal loans by the government also falls under riba.

“The government should ensure that internal, external loans and transactions should be made interest-free. Transactions with international institutions, including the IMF and World Bank, should be made interest free as well,” said the court.

The court stated that Islamic banking and a banking system free of interest are two different things.

“Pakistan already has an interest-free banking system in some places [but] riba should end in Pakistan. The economic system of an Islamic country like Pakistan should be interest-free,” said the verdict.

The verdict stated that China, as per Islamic Shariat, is heading towards an interest-free banking system. It also directed the government to immediately remove the word interest from all banking and other laws.

The verdict also stated that the attorney general had informed them that it would take time to get rid of the interest-based system in the country.

The Supreme Court’s Shariat Applet Bench in 2001 had ordered the implementation of the order to abolish the interest system.

The court, giving the government five years to implement an interest-free banking system in the country, ordered that such a system should be implemented in the country by December 31, 2027.

The court stated that had Article 38-F been implemented years ago then the riba would have ended. It added that the State Bank of Pakistan, in its report, had stated that 20% of banking had shifted to the Islamic system. It added that five years is enough time to ensure the implementation of an Islamic and interest-free banking system in the country.

“The government is expected to present an annual report on the interest-free system in Parliament,” said the verdict. The court also declared the Interest Act 1839 and all laws and provisions facilitating interest as unlawful.

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Donald Lu visits Finance Minister Aurangzeb at the World Bank headquarters.

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Wednesday saw Minister for Finance and Revenue Muhammad Aurangzeb meet US Assistant Secretary of State for South and Central Asian Affairs Donald Lu and Principal Deputy Assistant Secretary Elizabeth Horst.

The finance minister briefed US officials on Pakistan’s reform plan at the World Bank. Meeting both delegations decided to improve bilateral ties.

Meeting topics included alternative energy, agriculture, climate, and tech industry. Boosting the Pakistan-US economic partnership was another finance ministry priority.

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His name is Donald Lu.
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The State Department’s top South and Central Asia diplomat is Donald Lu, assistant secretary of state.

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Huge investment potential exists in the telecom and IT sectors. Shaza Fatima

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She noted that the current administration is dedicated to fostering foreign investment in the nation, in line with the Prime Minister’s goal.

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WB pledges complete support for changes aimed at stabilizing Pakistan’s economy.

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Federal Minister for Finance and Revenue, Muhammad Aurangzeb, met with President of the World Bank Group, Ajay Banga, according to a press release from the ministry of finance here. During the meeting, the minister discussed Pakistan’s progress under the nine-month Standby Arrangement (SBA) program as well as ongoing reforms in priority areas of taxation, energy, and privatization.

According to the statement, the minister also extended an invitation to the president to visit Pakistan, and both parties acknowledged the necessity of a rolling 10-year country framework plan.

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The chief executive officer of the US International Development Finance Corporation (DFC), Scott Nathan, also met with the minister of finance.

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