Govt to establish ‘interest-free’ Islamic banking system, says Dar

The federal government announced on Wednesday that it would move forward to establish an interest-free Islamic banking system and withdraw appeals filed against it in Pakistan’s Supreme Court in the coming days.

This was announced by Federal Finance Minister Ishaq Dar on Wednesday. He said appeals filed by the State Bank of Pakistan against the imposition of Islamic banking in the country will be withdrawn.

In a televised statement, he said that in recent years progress towards imposing an “Islamic” banking system had encountered obstacles and challenges.

He further revealed that when the Federal Shariah Court issued its verdict earlier this year to impose an Islamic form of financial and banking system, the government knew that the State Bank of Pakistan and the National Bank, all two female government officials in the banking and financial sector, had separately filed appeals to the Supreme Court of Pakistan against the verdict.

“Because it is ordained in the Holy Quran, I believe the barometer of our decisions is the Quran and the Sunnah, we should all follow them,” he said.

Dar said that with the permission of Prime Minister Shehbaz Sharif and after due consultation with SBP Governor Jameel Ahmed, the central bank and the National Bank will withdraw their appeals to the Supreme Court and that their government will do everything possible to enforce the Islamic banking system. as soon as possible.

He prayed for God’s guidance on imposing this new interest-free system. He however recalled that there are many challenges in implementing this system since the entire Pakistani banking system which has been in vogue for 75 years cannot suddenly switch to a different system.

“The government has decided in light of the teachings of the Holy Quran and the Sunnah that the two appeals against the verdict of the Federal Shariah Court by the government will be withdrawn and work to implement the system within the set time.

The FSC’s verdict in the long-delayed case was announced in April. The court had ruled that the federal government and provincial governments should amend relevant laws and issued guidelines that the country’s banking system should be interest-free by December 2027.

Commercial banks and the central bank later appealed to the Supreme Court to challenge the FSC’s verdict.

During his press conference on the matter, Dar said, “With the permission of the Prime Minister and in consultation with the Governor of the SBP, I am announcing on behalf of the Federal Government that the SBP and the NBP will withdraw their appeals from the CS and of our government will try fully to implement an Islamic system in Pakistan as soon as possible.

Dar said there have been many detailed discussions on the matter over the past few weeks and a future roadmap has also been discussed with the SBP Governor.

The Minister of Finance acknowledged that there will be many challenges in the implementation of the FSC verdict and that the whole banking system and its practices could not be immediately transferred to a new system, but nevertheless, the government had decided to withdraw the appeals in the coming days and pivot Pakistan to a “no interest” direction within the time frame stipulated by the FSC.

The first petition for the abolition of the interest-based banking system in the country was filed with the FSC on June 30, 1990.

The then Chief Justice of the FSC, Dr. Tanzeelur Rehman, constituted a three-member bench which rendered judgment in the case on November 14, 1991 and called for its implementation by April 30, 1992. The government PML-N at the time challenged the Supreme Court’s decision. Years later, on December 23, 1999, the SC confirmed the FSC’s decision and ordered the authorities to ensure its implementation by June 30, 2000.

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