EDITORIAL: Finance Minister Ishaq Dar’s decision to give the economy a no-interest, sharia-compliant makeover by 2027, in keeping with the April judgement of the Federal Shariat Court (FSC), clearly raises more questions than it answers.
The first, of course, is about what caused this change of heart so suddenly after initially appealing against the verdict. Such a sharp change of track requires detailed planning and consultations, no doubt, and if the government machinery had been working on mounting a legal challenge to the FSC decision since April, it couldn’t possibly have devoted all its resources and energies towards embracing what is increasingly referred to as Islamic banking.
He said this decision was taken by the “coalition government”, but perhaps it’s still too soon to tell whether the other main part of the alliance, PPP (Pakistan People’s Party), is completely on board or not. And even though NBP (National Bank of Pakistan) and SBP (State Bank of Pakistan) fell in line quickly enough as the government has asked them to withdraw their appeals, which says a lot about the latter’s autonomy if not its own understanding of the enormity of this task, what about the concerns as well as legal positions of private sector banks?
There’s also the rather awkward fact that the jury is still out – except the FSC, of course – on how closely the interest rate regime of modern banking confirms with the Quranic definition of exploitative riba; a debate that continues in most Islamic countries yet we have, for political rather than economic or even religious reasons, reached our own conclusions, complete with the FSC’s stamp of approval. That explains why this particular industry has failed to make significant advances despite being in business for more than two decades, even with the complete backing of the state and blessings of the conservative religious lobby. It’s also not been able to refute mainstream claims that most of its financial ideas and instruments are Islamic in name only.
And the biggest question, which nobody has touched upon in all these years, is if this sharia compliance will require us to decouple from global financial institutions. We are one of the world’s most heavily indebted countries, after all, and require lending all the time just to stay above water. That runs into a lot of interest, of course, which explains why so much of our budget goes to debt as well as interest payments. So who will explain, and when, whether this arrangement will have to end or if FSC will give a special waiver for an Islamic economy to borrow on steep interest just to survive.
Since these things were not worked out, or even considered, before the finance minister’s sudden announcement, it seems that this decision, too, was taken without much introspection.
Indeed, there is already chatter to suggest that this is just one more desperate attempt by the coalition government to stay relevant as it stumbles and falls over itself in trying to keep up with a very charged street opposition.
Even if it is so, it’s not clear what it is really meant to achieve. Would it win enough sympathy (read votes) from the religious right to offset the resentment caused by forcing completely needless challenges on an economy that is already flirting with default?
All things considered, it seems as if the PDM (Pakistan Democratic Movement) government has been forced into a dark corner and sees no way out other than appealing to people’s sensitivities by building its own Riyasat-e-Madina-like narrative. But this one could seriously isolate the economy when it is already vulnerable.
It’s a shame that leading politicians from across the divide prey on the public’s religious sentiments for purely political gain.
Copyright Business Recorder, 2022