ISLAMABAD — Pakistan will phase out interest from its economy to meet a crucial constitutional deadline. According to recent ministry figures, national financial sector assets climbed to Rs79,780 billion by 2025. This massive sum equals 68.5 percent of the gross domestic product. Commercial banks currently hold the vast majority of these assets at Rs63,231 billion, while non-banking financial institutions account for Rs6,844 billion.
Officials stated that the historic shift to an Islamic financial system will occur gradually to maintain market stability. Specifically, the ministry has introduced a new framework for sukuk (Islamic bond) issuance. Experts have already accelerated development on short-term instruments. Furthermore, the state will amend federal and provincial laws to legally support Shariah-compliant finance across all territories.
Commercial banks must adjust their IT systems for Islamic banking immediately. Additionally, management must launch extensive staff training programs to handle the new protocols. From 2027 onward, the state will issue all new government financing through Shariah principles. Consequently, institutions will convert existing conventional loans to Islamic financing in structured stages. The State Bank of Pakistan will also align its monetary policy with Shariah standards.
The ministry stressed that the transition will safeguard financial stability during the overhaul. This strategic move follows the historic 26th Constitutional Amendment, which legally committed Pakistan to an interest-free economy from January 2028. The Jamiat Ulema-e-Islam party heavily demanded this economic change during the constitutional negotiations. Previously, the Federal Shariat Court had directed the state to establish a completely riba-free (interest-free) system by December 31, 2027. Therefore, these synchronized government reforms will formally reshape the national banking landscape over the next two years.
