Pakistan is preparing to move its entire financial system to Shariah-compliant, interest-free (Riba-free) modes starting January 2028. The Ministry of Finance has released a strategy paper for the post-2027 period that outlines this major transition.
From 2028, the federal and provincial governments will raise all new domestic and international financing only through Islamic instruments like Sukuk. Existing conventional loans and agreements will continue until their maturity and then be converted gradually. This follows the Federal Shariat Court’s judgment and the 26th Constitutional Amendment.
Key steps in the plan include:
- Creating an Asset Registry Company to hold public assets for issuing sovereign Sukuk.
- Introducing regular Sukuk issuance with an annual calendar.
- Developing short-term Sukuk (3 and 6 months) for liquidity management by the State Bank of Pakistan (SBP).
- Amending laws to support full Islamic banking.
- Training bank staff and using existing Islamic banking infrastructure in conventional banks.
The biggest challenge is converting the large government debt portfolio. The SBP and other regulators will work together to ensure a smooth shift without disrupting the economy. Monetary policy tools will also move to Shariah-compliant options.
This reform aims to align Pakistan’s economy with Islamic principles while maintaining financial stability. It could attract more ethical investments and boost confidence among local and foreign stakeholders. Banks are already preparing, and most have the technology in place.