Federal Shariat Court’s Judgment on Ribā-Free Economy of Pakistan: Challenges in Implementation and the Way Forward
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This paper explores the challenges in implementing the Federal Shariat Court (FSC) judgment on the Ribā-free economy of Pakistan. This study employs the Qualitative Content Analysis (QCA) method to analyze the data gathered through semi-structured interviews with various stakeholders, including Shariah scholars, Islamic economics and finance researchers, Islamic bankers, and central bankers. The findings suggest that the conversion of the existing large public sector debt (higher than the current GDP of Pakistan) to Shariah-compliant modes of financing is the most significant challenge ahead of Pakistan’s government. The next potential challenge to the government is what it would do in case international donors (IMF, World Bank, Paris Club) do not lend money through Islamic modes of financing. Moreover, monetary policy management by the State Bank of Pakistan (SBP) in the Islamic banking system also remains a challenge. All these challenges can be addressed if the Pakistani government issues Sukūk instead of issuing T-Bills more frequently and in large quantums. Additionally, the government can get funding through the capital market. An alternative strategy might be to issue project-linked, equity Sukūk that generate new assets, rather than using existing assets to issue Sukūk. The findings may help the Government of Pakistan in the smooth transition of its current economy to a Ribā-free economy. Once Pakistan’s economy is completely Islamized, then other Muslim countries may follow Pakistan in transitioning their economies as well. To the best of the authors’ knowledge, this study is the first of its kind, which has identified the main challenges that may arise in implementing the FSC judgment. Moreover, few suggestions have been made to address such challenges.
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