Pak panel to Islamize8217; financial system formed

The State Bank announced Sunday that it had set up an eleven-member high level commission quot;to carry out, control and supervise the process of transformation of the existing financial system to one conforming to the Shariah.quot;

But high ranking officials of the State Bank said that while Sunday8217;s move is in accordance with clear instructions of the Supreme Court, the government8217;s game plan was to let things remain the way they are and return to the Supreme Court in 2001 with the plea that the government had not been come up with a quot;workable planquot; on the change-over to an interest-free financial system.

The Supreme Court judgment, which came after much deliberation on the issue, has decreed that since Riba is un-Islamic, it is not acceptable in Pakistani society, which is essentially Islamic.

The judgment has instructed the government to make arrangements for the elimination of Riba from every day dealings by 2001.

Pakistan has a modern interest-based banking system which has seen attempts at quot;Islamizationquot; of various financial instruments but most of the efforts have failed.

The most recent attempts were made a decade back under which the government declared interest on banking instruments banned and instead paid quot;profitquot; to investors and account holders.

But bankers said that there was little change in the system and the word quot;profitquot; was being used in place of quot;interestquot; because for Pakistan this was more politically correct.

A former Pakistan prime minister, Moin Qureshi, who manages an international fund of his own, told journalists at a press conference in Karachi earlier in the week that while the idea was workable, quot;it is a very challenging task since Pakistan does not live in isolation.quot;

Foreign investors, however, are afraid about their investments while creditors want to know how Pakistan will meet its external debt payments if in 2001, the giving and taking of interest would become unlawful.

However, a leading corporate lawyer, Mehmood Mandviwala, says that the protection available to foreign financial is two-fold: firstly, the judgment has not declared such obligations as void and the Enforcement of Shariah Act of 1991 provides a blanket protection to such obligations until an alternative economic system is introduced.

Mandviwala says: quot;Foreign financial obligations are safe till such a time an alternative system is available and foreign lenders agree to lend on such terms.quot;