At a recent gathering, organised by Majlis Ittehad-e-Ummat Pakistan (MIUP), over 60 top religious figures from all schools of thought have called for the full implementation of the constitutional amendment aimed at completely eliminating “riba” (interest) from the country’s financial system by the end of 2027, as outlined in the 26th constitutional amendment passed in 2024.
According to a joint statement issued by the MIUP, the event was attended by 61 prominent religio-political leaders, including Mufti Taqi Usmani, Maulana Fazl-ur-Rehman, Mufti Muneeb Ur Rehman and others.
“The 26th Amendment set December 31, 2027, as the deadline to end interest in the country, and the central bank advised all banks to make their financial matters interest-free before the deadline. However, efforts appear to be underway to sabotage this move, with obstacles created to prevent its implementation. It is learnt by reliable sources that the Ministry of Law has prepared a memorandum proposing immunity for large banks with foreign shareholding from the constitutional amendment to end interest by 2027. The reason given for this exemption is that it is a requirement of certain international agreements,” the statement read.
In his address, Mufti Taqi Usmani claimed that even the majority of large banks with foreign shareholding have already been given immunity from the constitutional requirement to end riba. He termed this act against the Constitution, stating that such excuses, often citing international agreements and conventions, were unjustified, and that these banks should not be exempt from the constitutional obligation to eliminate interest.
Mufti Muneeb ur Rehman also demanded full implementation of the constitutional amendment related to the elimination of interest, saying that the Constitution of Pakistan holds supreme authority, and every foreign company operating in the country is bound to comply with local laws. He emphasised that international agreements cannot override local law unless passed by Parliament.
All religious leaders emphasised that the constitutional deadline set to eliminate interest from the country should be fully implemented in both letter and spirit.
Pakistan’s journey toward eliminating riba has been a prolonged constitutional and legal process spanning over decades. The Constitution of Pakistan, in the 1970s, mandated the elimination of riba as early as possible.
A petition filed in 1990 led to a 1992 ruling by the Federal Shariat Court (FSC), which called for the abolition of interest. This decision was later challenged but upheld by the Supreme Court of Pakistan (SCP).
However, in 1999, the SCP issued a directive for implementation, which was suspended in 2002, sending the case back to the FSC for further interpretation, effectively stalling progress for years.
In 2022, after 23 years of deliberation, the FSC declared Pakistan’s current interest-based financial system un-Islamic and ordered the government to implement a riba-free system by December 31, 2027.
However, in June 2022, the SBP, along with one public and three private banks, filed appeals with the Supreme Court against the FSC’s verdict. The SBP sought “guidance” and “clarifications,” arguing that five years might not be enough for a complete transformation without disruption and raising concerns about international financial obligations and the stability of the financial sector.
In November 2022, the then Finance Minister, Ishaq Dar, announced that the government had decided, in consultation with the SBP, to withdraw the appeals. However, appeals moved by three private commercial banks were still pending.
In October 2024, Pakistan’s parliament passed the 26th constitutional amendment that stipulates all forms of “riba” or interest must be eliminated before January 1, 2028. The amendment mostly contains reforms related to the country’s judiciary. But, it also changed the previous Article 38 (f) of Pakistan’s constitution, which called for the elimination of interest from the country “as early as possible.” However, the amendment set a deadline of December 31, 2027, to eliminate the riba.
“In the Constitution, in Article 38, for paragraph (f), the following shall be substituted, namely: (f) eliminate riba completely before the first day of January, two thousand twenty-eight,” the 26th Constitutional Amendment Bill, 2024, states.
The clause was added to the draft amendments at the suggestion of Jamiat Ulema-e-Islam-Fazl (JUI-F), the Maulana Fazl-ur-Rehman-led religio-political party, which at that time gave the government a tough time in presenting the draft of the amendment bill.
In line with the Shariat Court’s 2022 ruling on riba, the State Bank of Pakistan granted in-principle approval for establishing a digital retail Islamic bank and Shariah-compliant digital banking through Islamic window operations.
On the flipside, financial experts argue that eliminating riba in a single step may be challenging for the central bank. They believe that a gradual transition would be necessary to avoid disrupting the financial system, as it would require extensive structural adjustments in monetary policies, banking operations, and regulatory frameworks.
They also note that many court rulings have not been implemented due to administrative reluctance. While the central bank is tasked with enforcing the Federal Shariat Court’s decision, experts remain doubtful it will follow through, given past examples in implementing such rulings. This raises concerns about meeting the 2027 deadline for eliminating interest.
