Will switch to Islamic banking system in 5 years: Ishaq Dar

ISLAMABAD: The federal government has announced a move to introduce an interest-free banking system in Pakistan and withdraw within the next few days two review appeals from the Supreme Court of Pakistan against the Federal Shariat Court verdict on usury.

The was stated on Wednesday by Federal Finance Minister Ishaq Dar, who announced withdrawal of two review petitions filed by the State Bank of Pakistan and National Bank of Pakistan against the judgment of Federal Shariat Court to transform Pakistan’s economic and financial system as Riba-free in five years.

Addressing a news conference, Dar said PM Shehbaz Sharif and the PDM government took the decision to withdraw the review petitions on the Iqbal Day. He said the FSC had given a verdict to transform the banking and financial system within five years. “It’s also a teaching of Islamic law and Sunnah,” he said, adding that there were challenges for moving towards a Riba-free system as it could not be done in one day but they would move towards a Shariah-compliant system with increased pace compared to the past.

Dar said the government held discussions on this issue in the last few weeks. It discussed the future roadmap of the governor State Bank. He said the government had taken steps towards a Riba-free economy during 2013 and 2018 for moving towards an Islamic banking system. A special committee headed by Islamic scholar Taqi Usmani worked a lot to transform the economy into an Islamic economic and banking system. However, this task could not get momentum in the last few years.

The government, he said, knew that the SBP and NBP had filed appeals before the Supreme Court of Pakistan against the judgment of Federal Shariat Court for converting the interest-based system into Riba-free in five years. “I understand that Quran and Sunnah teachings should prevail, so after the permission of PM and in line with the recommendation of governor SBP, the review appeals would be withdrawn from the Supreme Court of Pakistan within the next few days.”

Dar stated the government would move towards introducing a Riba free Islamic-compliant financial and banking system as early as possible. He said the government would move fast compared to the past pace for achieving the objective of a Riba-free economy. He said the banking system continuing for 75 years could not be transformed at once. The government was taking important measures for the betterment of economy.

Dar said he had several meetings and discussions with the governor, State Bank of Pakistan. He said the government was determined to overcome all challenges to be faced while introducing the new banking system.It is yet to be seen how the IMF responds to the government’s decision to withdraw the filed appeals from the Supreme Court.

The IMF’s upcoming review is expected within the ongoing month under the ongoing Extended Fund Facility (EFF) but so far no formal schedule has been finalised. Many political and economy commentators say that the IMF would not have any problem if the government moved towards the Shariah compliant component of banking system in domestic market.

The IMF, according to them, would have no issue unless the government remained committed to international financial system and continued paying interest on foreign loans and obligations. This scribe sent questions to IMF Resident Chief’s office but got no response till the filing of the report.