Pakistan Plans Full Shift To Islamic, Interest-Free Financing From 2028

The federal and provincial governments will raise all new domestic and international financing through Shariah compliant instruments from 2028 as part of Pakistan’s roadmap to transition to a Riba free financial system, according to the Ministry of Finance.

The ministry’s Strategy Paper Post 2027 Financial System in Pakistan states that all financing secured after December 2027 will be raised through Islamic modes of financing, while existing conventional loans and financing agreements will continue under their original terms until maturity before being converted into Shariah compliant instruments.

The report identifies the conversion of the government’s existing debt portfolio as the biggest challenge in the transition. To support the process, the Finance Division plans to establish an Asset Registry Company to hold public assets for issuing sovereign Sukuk. The government also intends to introduce a regular Sukuk issuance framework and an annual issuance calendar.

According to the strategy, the State Bank of Pakistan and commercial banks are in the final stages of developing three month and six month Sukuk to support liquidity management, with the framework expected to be completed before December 2027. Amendments to federal and provincial laws are also planned to establish a comprehensive legal framework for Shariah compliant finance.

The ministry said most conventional banks already have the required technology infrastructure through their Islamic banking operations, while training programs are underway to prepare banking staff for the transition. The State Bank will also gradually shift to implementing monetary policy through Shariah compliant instruments.

The report said the federal government, the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan, and other stakeholders will jointly oversee the transition by introducing legislative reforms, expanding Sukuk based financing, strengthening the regulatory framework, and building institutional capacity to ensure a smooth shift to a Riba free financial system after 2027.