Govt promoting interest-free economy, Islamic banking in line with FSC verdict: FinMin

The federal government is promoting an interest-free economy and establishing Islamic banking branches across the country in line with the Federal Shariat Court’s (FSC) verdict for getting rid of interest-based system, said Federal Minister for Finance and Revenue Muhammad Aurangzeb.

The domestic economy was put on path to getting rid of the interest-based system in light of the FSC’s directives to replace the prevailing system with the Islamic interest-free fiscal principles, he added.

“Verdict has arrived to end interest-based system and we are working to implement it,” the finance czar said while responding to a motion titled “This House may discuss the economic situation in the country”.

He said that honourable lawmakers delivered impassioned speeches in the House, pointing towards Sunni Ittehad Council (SIC) legislator Ali Muhammad Khan who demanded the Constitution of a special parliamentary committee for the abolition of riba.

The motion was presented by Muttahida Qaumi Movement-Pakistan (MQM-P) lawmakers Mustafa Kamal, Aasia Ishaque, and Hassan Sabir, demanding the implementation of the FSC’s orders and adopting special measures the regarding abolition of the interest-based system in five years.

He detailed that Pakistan’s foreign exchange reserves stood at $8 billion, which depends on interest.

The FSC judgement, which was reserved by a three-member bench, issued in April 2022 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.

Continuing his speech on the floor of the House, the finance minister added that the country was expecting the arrival of a $1.19 billion new tranche from the International Monetary Fund (IMF) likely this week which would elevate the reserves between $9 to $10 billion till the end of June.

Subsequently, Aurangzeb stressed the importance of promoting agricultural growth to achieve a rate of 5% to 6% annually, in addition to harnessing the potential of the local livestock sector.

He highlighted the significant growth experienced in the agricultural sector due to successful bumper crop harvests, which promised a positive impact on the industrial sector.

He expressed his intention to enhance the tax-to-GDP ratio, which currently stood at 9%, through tax enforcement measures and expanding the tax base.

Aurangzeb affirmed the support of friendly countries both domestically and internationally for Pakistan’s economic growth.

The federal minister outlined the government’s focus on three key areas for transformation: tax, energy sectors, and reforms in the State Owned Enterprises (SOEs).

He expressed his intention to enhance the tax-to-GDP ratio, which currently stood at 9%, through tax enforcement measures and expanding the tax base.

— With additional input from APP.