To address the country’s current financial crisis, Finance Minister Ishaq Dar has given the greenlight to raising interest-free debt worth around $2 billion from overseas Pakistanis for a five-year term.
While speaking at a conference titled ‘Defining a Roadmap for the Islamisation of Pakistan’s Economy’, Saylani Welfare International Trust (SWIT) Chairman Bashir Farooqi sought the finance minister’s approval for the trust to voluntarily raise $2 billion from overseas Pakistanis through their global welfare network.
Dar, who joined online through a video conference link, issued directives to the State Bank of Pakistan (SBP), the committee of SWIT officials and like-minded people to meet and deliberate upon the procedure to raise the said funds.
He further underlined that “The transaction should be transparent, well-documented and there should be a well-defined mechanism to raise the debt.”
“I will inform SBP Governor Jameel Ahmad, myself. You should coordinate with SBP officials. First define the structure of the proposed transaction and ensure that it is in accordance with the rules, laws and the constitution in place,” said Dar.
The finance minister explained that there is already a structure for patriotic Pakistanis to deposit funds with the central bank.
“Once you are done setting up the structure of the transaction, I will set up a meeting with you (SWIT and other such institution officials) in Islamabad.”
Earlier, the SWIT chairman said that the debt will be raised for a five-year term and that it will be interest-free. He sought the government’s approval to hold a press conference to appeal to overseas Pakistanis to deposit funds with the SBP in the larger national interest. “We are hopeful that we can raise $2 billion deposits within a few days in collaboration with four to five institutions including, The Citizens Foundation (TCF) and others,” said Farooqi, while speaking with Dar at the National Islamic Economic Forum Conference 2023 on Thursday.
“The government may use the funds to clear imported goods (raw material) stuck at Karachi port due to the low-availability of foreign exchange reserves at present,” Dar added. The release of raw material from the ports is critical to generate economic activity and help hundreds and thousands of people return to work.
Explaining that Dar and the welfare institution officials recently met at the Prime Minister House to discuss the idea of raising the funds from overseas Pakistanis, Farooqi expressed optimism that they would meet again soon. Dar and the welfare trust’s officials deliberated upon the option to raise the funds at a time when Pakistan is engaged in staff level talks with the International Monetary Fund (IMF) to revive its stalled $7 billion loan programme.
Pakistan’s foreign exchange reserves depleted further by $592 million to $3.1 billion, the central bank said in its latest weekly update on Thursday. The level is lowest since February 2014 and is barely enough to finance a few weeks’ worth of imports.
The revival of the IMF programme is a must to unlock additional financing of $3-4 billion due from multilateral and bilateral creditors over the next couple of months.
On another occasion, Dar extended his government’s full support in making the banking system of Pakistan interest-free and completely transforming it into a Shariah-compliant financial system within the provided five-year deadline given by the Federal Shariat Court.
He stated that as soon as he assumed office in September 2022, he implemented his thinking by advising the SBP and the National Bank of Pakistan (NBP) to withdraw their appeals against the judgement of the Shariat Court to eliminate interest from the banking system.
“Islamic financial system is very close to my heart,” he noted.
Dar said that a steering committee had been formed with all the relevant stakeholders. As its patron, he will work on the cause of transforming the banking system as per the Shariah principles. He recalled that during his previous term as finance minister, he offered 2% tax exemption to those listed manufacturing companies that had adopted the Islamic banking system.
Published in The Express Tribune, February 3rd, 2023.
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