Pakistan sets Jan. 1, 2028 deadline to eliminate ‘riba’ or interest from country

Islamabad: Pakistan’s parliament on Sunday passed a historic constitutional amendment bill that stipulates that all forms of “riba” or interest must be eliminated before Jan. 1, 2028, with the move likely to promote Islamic banking in the country.

Pakistan’s Federal Shariat Court (FSC) directed the government in April 2022 to eliminate interest by 2027, maintaining that Islam prohibited it in all its forms and manifestations. The FSC determines whether Pakistani laws comply with Islamic law or not.

Pakistan’s ruling coalition government in the wee hours of Sunday passed the constitutional amendment bill by the required two-thirds majority in both houses of parliament. The amendment mostly contains reforms related to the country’s judiciary, which has stirred political debate in the country. The amendment changed the previous Article 38 (f) of Pakistan’s constitution, which called for the elimination of interest from the country “as early as possible.”

“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,” a copy of the 26th Constitutional Amendment Bill, 2024, states.

Last year, Pakistan’s central bank set a target to increase the share of Islamic banking in the country to 35 percent by 2025. At present, the share of Islamic banking in the overall commercial banking system in the country is 20 percent.

Pakistan has six full-fledged Islamic banks offering a wide range of products and the annual growth rate of Islamic banks’ assets and deposits has been 25 percent and 22 percent respectively over the last five years, according to the central bank’s data.