Finance Minister Ishaq Dar on Wednesday announced that the government of Pakistan would withdraw its appeals against Federal Shariat Court’s (FSC) decision regarding the interest-free banking system in Pakistan.
The FSC, in its decision in April, declared that the prohibition of Riba (interest) was absolute in all its forms and manifestations according to the injunctions of Islam and in accordance with the Holy Quran and Sunnah. Therefore, it should be eliminated from the country in five years.
The decision came after the matter pended for 20 years.
Read more: FSC gives govt five years to eliminate Riba
“We are of the view that five years period is reasonably enough time for the implementation of our decision completely i.e convert the economy of Pakistan into, an equitable, asset-based, risk sharing and interest-fee economy,” read a 298-page judgement authored by Justice Dr Syed Muhammad Anwer and endorsed by two other judges.
“Therefore, we would specify the 31st day of December 2027 on which the decision shall take effect by way of the complete elimination of Riba from Pakistan,” it added.
The State Bank of Pakistan (SBP) moved to the Supreme Court against the decision.
"On behalf of the government, I am announcing today that we are withdrawing our appeals [against the decision]," Dar said during a news conference in Islamabad.
He admitted that Pakistan did not move forward towards an interest-free banking system as it should have. "There are some challenges as this [the current] has been the banking system in the country for the past 75 years which would be needed to be changed," he added.
He said that decision was taken after permission from Prime Minister Shehbaz Sharif and with consultation with SBP governor.
Also read: SBP moves apex court against Shariat court's interest ban
Dar said that the government would try to implement the Islamic banking system as soon as possible. "God willing, we will take Pakistan towards an interest-free economy," he added.
In June, Salman Akram Raja filed the petition on behalf of the SBP, while four other private banks also appealed against the FSC’s decision with the Ministry of Finance, Ministry of Law, Banking Council chairman and others listed as parties.
The central bank’s appeal stated that the FSC did not heed the orders of the Supreme Court remand order and declared the rules related to savings certificates as un-Islamic, and thus, ordered to amend the rules.
The banks requested that the appeal against the decision of the Sharia court be allowed, and the extent of the points raised in the decision be amended.
Finance Minister @MIshaqDar50 addressing a news conference in Islamabad https://t.co/MOhGFcrViE
— Radio Pakistan (@RadioPakistan) November 9, 2022