Pakistan’s Finance Minister, Ishaq Dhar, stated that the country would transition to a ‘interest-free’ banking system under Islamic law by 2027.
According to the Dawn newspaper, the announcement came after Finance Minister Dhar expressed the government’s intention to withdraw its appeals against the Federal Shariat Court’s April decision to eliminate interest from the country in five years.
According to the Federal Shariat Court (FSC), Pakistan’s current interest-based banking system violated Sharia law because interest was absolute in all forms according to Islamic injunctions.
“With the permission of the prime minister and consultation with the State Bank of Pakistan governor, I’m announcing on behalf of the 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 as quickly as possible implement an Islamic system in Pakistan,” Dar was quoted as saying.
He acknowledged that there would be difficulties in implementing the FSC’s decision and that the entire banking system and its practises could not be immediately shifted to a new system, but the government had decided to withdraw the appeals in the coming days and pivot Pakistan to an interest-free direction within the stipulated time by the FSC, the report said.
The decision of the top Islamic court came after the case had been pending for 20 years.
We believe that a five-year period is reasonable enough time to fully implement our decision, which is to convert Pakistan’s economy into an equitable, asset-based, risk-sharing, and interest-free economy, according to the FSC’s 298-page decision issued in April.
As a result, we would specify the 31st of December 2027 as the date on which the decision would take effect by completely eliminating Riba (interest) from Pakistan, it stated in its long-awaited verdict.
According to the report, the State Bank of Pakistan, the country’s apex bank, filed a petition against the FSC’s decision in June with the Ministry of Finance, Ministry of Law, and the Chairman of the Banking Council, among others, claiming that the FSC failed to follow the Supreme Court’s remand order.
It requested that the appeal against the Federal Shariat Court’s decision be allowed, and that the scope of the points raised in the decision be amended.
According to the Dawn newspaper, the first petition to the FSC for the abolition of the country’s interest-based banking system was filed on June 30, 1990. A three-judge panel issued its decision, requesting that it be implemented by April 30, 1992.
The Pakistan Muslim League-Nawaz government challenged the decision in the apex court.
The Supreme Court upheld the FSC decision on December 23, 1999, and directed authorities to ensure its implementation by June 30, 2000.
Following that, a review appeal was filed with the Supreme Court in 2002, and on June 24, 2002, the decision of the Federal Shariat Court was suspended, and the case was remanded to the FSC for interpretation of interest.