ISLAMABAD: The Federal Shariat Court on Thursday asked the government to eradicate the interest-based banking system from the country by 2027 and replace it with a riba (interest) free system.

Justice Dr Syed Muhammad Noor gave the verdict on the 19-year-old case which was referred back to it by the Supreme Court, following appeals against the FSC verdict.

In today's verdict, the court ordered the government to establish riba-free banking system in Pakistan in line with Islamic law.

According to the court order, interest on loan or anything else is considered riba, including government payments of local or international loans.

The FSC observed that the government should make loans interest free, while calling for relevant changes in the laws. It also observed that two such appeals are already pending with the Shariah Appellate Court.

The court called for the immediate revocation of all laws that contain the word interest. All those laws that contain the word interest should be declared contrary to Islamic laws, the verdict stated.

In line with the verdict, the federal government has been urged to amend all laws pertaining to interest by December 1. It also called for making transaction with multi-lateral and bilateral donors including the IMF and World Bank interest free.

It stated that the petitioners had submitted their opinion on the creation of an interest-free system based on Islamic banking data. It stated that the FSC didn’t agree with the government’s view that interest-free banking would have a negative impact on the country’s economy.

“Elimination of interest from the country’s economic system is a requirement under law and Shariat,” it stated.

The court said that Islamic banking is free of risk and exploitation while calling for the elimination of riba. “The elimination of riba is one of the fundamental precepts of Islam.”

Banks taking back more than the loaned amount falls in the ambit of riba, it continued.

The Federal Shariat Court emphasised that all forms of interest fall in the category of riba. “Regardless of the reason for the loan, the interest calculated on it will be called riba.”

The court heard the attorney general along with the petitioners and respondents in the case.