Interim Finance Minister Dr Shamshad Akhtar on Monday informed the Senate that the government is committed to promoting both banking industry and regulators of Islamic banking in the country.
Speaking before the passage of a resolution, she recalled when she was governor of the State Bank of Pakistan (SBP), she made all-out efforts to promote Islamic finance industry in a very aggressive manner.
"When I was governor of the central bank [SBP], I aggressively promoted Islamic finance industry and subsequent governments were also engaged in promoting the industry," she added.
In order to promote the Islamic banking, close to $3.6 billion worth of Sukuk bonds had already been floated in the international market, she said, adding Islamic financial banks have been growing at a fairly decent rate of 14.5 percent which is fairly decent for an industry that took off in early 2000.
"We've five full-fledged banks and 16 conventional banks that are involved in this business," she added.
The house passed a resolution moved by Senator Shibli Faraz of Pakistan Tehreek-e-Insaf (PTI) unanimously, which called upon the government to take necessary steps to abolish riba (interests at the earliest and at least 30 percent of all new government debts should be replaced with Shariah compliant mode.
The resolution also recommended that the funds of Ministry for Religious Affairs related to Hajj, Zakat and Usher should be replaced or invested under Shariah compliant mode.
Dr Akhtar said that the government had no issue in replacing 30 percent of government debts with Shariah compliance mode but expanding Islamic banking at fast pace would be detrimental because 'we have to let the market grow naturally.
She said that past governments had been trying to float Sukuk but much more government properties were required for the required volume.
"There is no dispute currently. In fact I have met the Islamic banking CEOs who also highlighted lack of Sukuk underlined issues for being able to meet the liquidity reserve requirement which is the real problem," she said. She added that it would take a long time to prepare for additional Sukuk instruments.
Senator Faraz said that Islamic banking is a reality in Pakistan and worldwide and the government should allocate some proportion of funds to the Islamic banking sector for borrowing.
Senator Mushtaq Ahmed of Jamaat-e-Islami said that in 1973 Constitution, it is mentioned that riba system would be abolished as soon as possible; however, it could not be abolished despite lapse of 45 years.
He said on one hand non-Islamic Western countries are moving towards zero interest rate due to flawed high interest rate system, while on the other, the interest rate in Pakistan is going higher.
Senator Rehman Malik of PPP said that Sukuk bond was also a form of Riba-based loan and it had nothing to do with Islamic system. He questioned whether the government is planning to replicate any successful model of any country like Turkey or Argentine to get rid of the rapidly growing foreign debt.