Pakistan to adopt Shariah-compliant financial system from 2028

Pakistan is on track to implement a Riba-free financial system by the end of 2027, a significant shift mandated by both the Federal Shariat Court and a constitutional amendment. The transition means that from January 1, 2028, all new government transactions, including loans, must adhere to Shariah-compliant principles. Existing conventional loans will remain in effect until their maturity dates.

The Ministry of Finance has developed a comprehensive strategy to manage this transition, aiming for a smooth and seamless shift without major disruptions. This strategy, finalized after extensive consultations with stakeholders, regulators, financial institutions, and religious scholars, outlines key actions, potential risks, and milestones. It also clarifies the roles and responsibilities of various parties involved in the process.

“

Riba is absolutely prohibited in all its forms and manifestations.

A key aspect of the plan is the provision for majority foreign-owned banks and financial institutions, which will be allowed to operate a hybrid model, offering both conventional and Islamic financial products. This approach aims to maintain financial stability and cater to diverse market needs during and after the transition.

The legal and constitutional groundwork for this shift is being laid, with formal approval from the federal cabinet pending. The strategy emphasizes the need for enabling legal, taxation, regulatory, and supervisory frameworks, alongside the availability of Shariah-compliant liquidity management instruments. The Ministry assured that all existing commitments and obligations to domestic and international parties will be honored as per contract terms, ensuring contractual sanctity and preserving investor confidence throughout the gradual shift away from Riba.

“

During and after the transition, all existing commitments and obligations towards domestic and international counterparties and stakeholders will continue to be honoured as per the terms of the contracts.