In a significant development, Federal Minister for Finance and Revenue Muhammad Aurangzeb has declared that Pakistan is on the path to abolishing its interest-based economic system, aligning with directives from the Federal Shariat Court (FSC). The move aims to replace the prevailing system with Islamic interest-free fiscal principles, marking a monumental shift in the country’s financial landscape.
Addressing the parliament in response to a motion titled “This House may discuss the economic situation in the country,” Minister Aurangzeb affirmed the government’s commitment to implementing the FSC’s orders. He highlighted the impassioned speeches delivered by honorable lawmakers, including demands from Sunni Ittehad Council (SIC) legislator Ali Muhammad Khan for the constitution of a special parliamentary committee to oversee the abolition of interest, echoing sentiments shared by various stakeholders.
The FSC’s landmark judgement, issued in April 2022, mandated the government to transition to an Islamic and interest-free banking system within five years, emphasizing that Pakistan’s economic framework should be devoid of interest in line with Islamic principles.
Providing insight into the country’s financial status, Minister Aurangzeb disclosed that Pakistan’s foreign exchange reserves currently stand at $8 billion, which are subject to interest. He also anticipated the receipt of a $1.19 billion tranche from the International Monetary Fund (IMF) in the coming week, which is expected to bolster reserves to $9 to $10 billion by June’s end.
Furthermore, the finance minister outlined the government’s multifaceted approach to economic revitalization, emphasizing the importance of agricultural growth, targeted tax reforms, and energy sector enhancements. He underscored the need to achieve an annual agricultural growth rate of 5% to 6% and harness the potential of the local livestock sector to drive economic expansion.
Minister Aurangzeb reiterated the government’s commitment to enhancing the tax-to-GDP ratio, currently at 9%, through stringent tax enforcement measures and broadening the tax base. He also acknowledged the support of friendly nations, both domestically and internationally, in facilitating Pakistan’s economic resurgence.
In conclusion, the finance minister outlined three primary areas of focus for transformative change: tax reforms, energy sector improvements, and reforms in State-Owned Enterprises (SOEs). With these measures in place, Pakistan aims to transition towards a robust and sustainable interest-free economic model, ushering in a new era of financial stability and prosperity.
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