Islamic economics in Pakistan
The economic policies proposed under the banner of "Islamisation" in Pakistan include executive decrees on Zakāt (poor-due), Ushr (tithe), judicial changes that helped to halt land redistribution to the poor, and perhaps most importantly, elimination of riba (defined by activists as interest charged on loans and securities).
[1][3] Conceived in late 1977 and carried out during his reign, the programme came in response to an upsurge in Islamic activism, and the problems and controversies associated with the policies of Zia's predecessor, Prime Minister Zulfikar Ali Bhutto.
But the country has also had Islamic modernists and secularists in positions of influence and "generations of Muslim usage and custom supported by the fatwa of respected ulema that held low rates of interest to be acceptable, non-usurious, and not riba", according to economist Feisal Khan.
[8] Even Allama Iqbal "the Thinker of Pakistan" (Mufakkir-e-Pakistan) "cited approvingly" the fact that Muslim princely states in India did not restrict modern banking or "attempt to impose some sort of `Islamic` concept of interest-free financial transactions.
[4] In 1969 the state-sponsored advisory body known as the Council of Islamic Ideology (CII), declared that Pakistan's banking system was "fundamentally based upon riba", and unanimously called for its elimination.
Zia's predecessor, leftist Prime Minister Zulfikar Ali Bhutto faced economic problems of stagflation and opposition to his programme of nationalization and land reform.
[16] In an effort to stem the tide of street Islamization, Bhutto also called for Islamisation and banned the drinking and selling of wine by Muslims, nightclubs and horse racing.
[18] On coming to power, Zia committed himself to enforcing Nizam-e-Mustafa,[16] a significant turn from Pakistan's predominantly secular law, inherited from the British.
Less than two years after the coup, Pakistan's Shia neighbor, Iran, saw a very unexpected Islamic revolution overthrow its well-financed pro-Western, secular monarchy.
Despite its success in initial first five years, the programme was fractured in many obvious reasons, and the stagflation again began to bite the country's resources, as well as many technical and scientific problems arise in the new economic system that the military government and Zia-ul-Haq himself was unable to solve.
[29] The newly elected, but technocratic government of Prime minister Mohammad Khan Junejo refused to pass the new and more stricter version of Sharia bill.
[30] Zia abruptly dismissed the government on May 29, 1988, and the dissolved parliament the next day, alleging a slow pace of Islamization, corruption, deterioration of law and order, and mismanagement of the economy.
[38] To convince these people and others, Jamat-e-Islami and like-minded groups have sponsored, and Saudi Arabia has financed, numerous symposia "dedicated to the task of defining the modalities of an interest-free economy."
[41]) Several decisions handed down in the late 1980s and early 1990s supported Tanzil-ur-Rahman's interpretation,[42] but most high court justices did not subscribe to his application of the Objectives Resolution, nor to a ban on interest, and Tanzil-ur-Rehman retired from the bench in 1990.
[43][44] The decision forbade riba absolutely without exceptions, defined it as "any addition, however slight, over and above the principal", including any system of markup, any indexing for inflation, payment by value rather than kind.
It specifically declared invalid two Islamic Modernist interpretations that avoided strict prohibition: considering anti-riba Quranic verses (2:275-8) allegorical, and use of ijtihad (independent reasoning) of the issue based on finding the public good (maslaha).
After much stalling by the government and bureaucracy, the Faisal case was upheld in 1999 by the Shariah Appellate Bench in the Aslam Khaki decision, with detailed orders to start the interest free economy.
[4][46] Pleading that implementation of the judgment would "create enormous problems" for the domestic, western-style banking and the economy, as well as Pakistan's "official and private business and financial dealings with the outside world", the government was given an additional year to Islamise by the Bench.
Two justices of the Shariah Appellate Bench resigned rather than take the oath, a new appeal with new judges found many "errors" in the Aslam Khaki case and overturned the ruling of a couple months earlier.
Most informed Pakistanis, however, insist that there is "no concerted move" to do away altogether with the conventional banking system, or to replace existing linkages and relationships with international financial markets.
Most of the assumptions and premises on which the (scientific) hypotheses about the Islamic economic system have been constructed are serious flawed... "[63] A report by the IMF noted that the government has been unable to formulate non-interest based instruments for financing budget deficits, "thus the government, which is the major exponent of the implementation of the Islamic system, is forced to raise funds through borrowing on the basis of a fixed rate of return".
)[67] Economist Izzud-Din Pal argues that "Islamising" the economy in Pakistan cannot be seen apart from the wider attempt of regimes and political elites with low levels of legitimacy and popularity to use religion to win public support.
[68][69] Feisal Khan also argues that instituting a strictly Islamic banking system of mudaraba and musharaka, as called for by the 1999 Aslam Khaki decision of the Shariah Appellate Bench could lead to financial catastrophe.
If murabaha and other fixed income instruments were banned and replaced by the more "authentic" profit and loss sharing, banks could only finance enterprise by taking "a direct equity state" as called for in mudaraba and musharaka.
[87] The repudiation of a major feature of Zulfikar Ali Bhutto's domestic policies during the regime of his daughter underscoring judicial independence (i.e. power), and the weakness of the elected government.
17 of 1980 ... the real lives and economic conditions of millions of Pakistani citizens have been completely unchanged, but a great number of socioreligious and political problems have arisen from state involvement in zakat administration.
The present level of grants "would add only 5-6 percent" to the income of the 1.2 million of the poorest Pakistani households even if every rupee of zakat collected went directly to these poor.
