Finance Minister Ishaq Dar claimed that Pakistan becomes interest-free within five years as he urged the banking sector to move towards and promote Islamic banking.
He expressed the views while addressing a seminar at the Federation of Pakistan Chambers of Commerce and Industry in Karachi where speakers spoke at length about interest-free banking. In April, the Federal Shariat Court (FSC) declared the prevailing interest-based banking system as against the Sharia and directed the government to facilitate all loans under an interest-free system.
The court had ruled that the federal government and provincial governments must amend relevant laws and issued directives that the country’s banking system should be free of interest by December 2027.
Speaking during today’s seminar, the finance minister said his government was working on converting the existing banking system to an interest-free one.
“Our government has an interest in Islamic banking, I will not say that we have achieved it.” He recalled that Meezan Bank had only 100 Islamic banking branches in 2013-2017 which had now increased to 1,000.
Finance Minister Ishaq Dar said that the assets of Islamic banks as of September 2022 were Rs7 trillion while their deposits were Rs5tr. “So a base has been created [and] we have to make this a successful system.”
The Finance Minister said that in addition to Islamic banking, mutual funds, capital funds and insurance businesses should also be promoted on an “Islamic basis”.
Ishaq Dar called on the central bank and the Securities and Exchange Commission of Pakistan (SECP) to work in this regard in a “positive” manner. “This is not something that cannot be done within five years. It can be done within five years.”
The finance minister went on to say that the government should have been “walking down this path” even before the FSC’s verdict in April.
“The losses incurred by the country of that are in front of us. Every person is crying that the inflation has reached the sky.” The minister said he had been informed about issues being faced in opening Islamic bank accounts and said he had directed officials to investigate the branches that were refusing to do so.
Earlier Finance Minister said that there are rumors that Pakistan will default. He said there is less than a 10% probability of Pakistan’s default.
Finance Minister Ishaq Dar ruled out the risks of Pakistan’s default and said, “Bloomberg pitches Pakistan’s one-year probability of default at a low of 10% as opposed to a highly dubious number of 93% circulated by an unscrupulous local political leader a few days ago.” He also said that “Pakistan will InshaAllah continue to honour its all financial commitments on time”
Ishaq Dar assured that Pakistan would not default and would be able to meet its upcoming $1 billion dollar bond payments in December. “We have never defaulted before. The bond will be paid and even arrangements have been made in principal for upcoming payments in the next year,” he added.