The government’s plan, if we can call it that, to implement a riba-free banking and financial system within the next five years has recently come under scrutiny by a Senate panel. This discussion has highlighted significant obstacles that must be overcome before the Federal Shariat Court’s order can be implemented.
The finance ministry and the State Bank appear to have no idea how the transition will be implemented or what effects it will have on the nation’s economy and financial relations with other countries. This supports the idea that the decision to drop legal challenges to the FSC judgement was made to placate and win over right-wing factions rather than on the basis of logical reasoning.
The risks the transformation plan poses to the economy are highlighted by PPP Senator Saleem Mandviwalla’s admission that some foreign banks, notably the Bank of China, had told him it would be difficult for them to operate in Pakistan if interest-free banking were to be implemented. The SBP has acknowledged that there are obstacles in the way of interest-free banking relating to public and foreign debt, monetary policy, etc.
As some clerics would have us think, defining riba in this era of a complicated and interconnected financial system is not simple. Ayesha Ghaus Pasha, the state minister for finance, stated during the Senate hearing that it is also difficult to achieve 100% interest-free banking in five years.
Even though the current Islamic banking system is acknowledged as “Sharia-compliant,” a panel member pointed out that it may be riba-free but is not necessarily interest-free. In order to avoid impeding efforts to integrate Pakistan with the global financial system and draw in international investors and financial institutions, the government must accept the panel’s recommendation to proceed slowly down this route.
The FSC should reconsider its choice and let the SBP and government decide and let the government and SBP decide after doing in-depth research and taking into account the reality of the current international financial system.
