Fixing the economy

August 28, 2022

Speakers at a national consultation propose various measures to rectify the ailing economy

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I

was excited when I received an invitation to join a National Consultation on the Economy of Pakistan on July 19. Most of the participants arrived on time. This suggested that everyone was eagerness for the discussion. Leading journalists, academicians, authors, serving and retired government officials and judges, religious scholars, development sector representatives, lawyers, engineers, economists and businessmen participated in the consultation.

Diverse thoughts and ideas were shared by the participants to address the economic woes of the country. Some of the religious scholars tried to link current economic policies with the practices of early Islamic society based on the belief that the Creator shall feed every living organism on this planet, including human beings. While the premise is undoubtedly true, why do some of forget the injunction that “a man shall have nothing but what he strives for” or “disperse in the land to seek the bounty of your Lord”?

The society needs a balanced view of life. It is undeniable that a majority of Islamic countries at the moment are suffering due to weak economic conditions. Many Muslim populations are dependent on non-Muslim societies for a reasonably comfortable life in modern times among other matters on account of transportation service, cellular phone communications, medicines, and food.

An attractive part of the session was the participation from diverse walks of life and from different parts of the globe. The meeting was held in the backdrop of a recent verdict of the Federal Shariat Court to ban interest (riba) from all financial institutions of Pakistan. The initial focus of the discussion was on miseries and exploitation of riba which frequently culminate in economic depressions.

In recent times, we have witnessed the global impact of such economic turmoil. The modern capitalist economies are blamed for the problems in banking systems, tax regimes, trade embargoes, global financial treaties and monopolies. All claims of a trickle-down effect are challenged by relevant experts calling for an overarching transformation of financial and economic systems to bring prosperity to the less advantaged. It has become a real task for economic and financial experts to enact a system ensuring equitable distribution of wealth which human society witnessed for hundreds of years earlier.

Experts in contemporary financial and economic systems emphasised the need for expanding the tax net to overcome the current difficulties of the country besides some other initiatives to expand and strengthen the economy. Most of the participants were surprised when a presenter from the UK told the audience that they pay 20 percent value added tax and almost 20 percent on savings to fulfil their national obligations. However, most of the participants remained convinced that the inadequacy of the current practices of the Federal Board of Revenue and called for tax reforms to provide relief to traders and business organisations.

A trade representative highlighted the fact that there was significantly more prosperity in Western countries where interest was not prohibited. The observation was based on apparent facts but lacked a deep understanding of business dynamics in most Western communities. There is a huge segment of leading global business organisations around the world that operate on zero leverage which means without interest-based financing for their operations. Also, venture capital to nurture new entrepreneurs and businesses contributes exceptionally in contemporary business landscape. This is identical to shariah-compliant mudarabah financing, in some cases angel investors opt for agreements that resemble the musharakah.

Many participants advocated fundamental practices of Islam to boost the economy. At the same time, several argued for strengthening modern economic indicators for the sustainability of the country. Land reforms, tax reforms, electoral reforms, reforms in import and export policies, targetted subsidies, human resource development, special treatment of overseas Pakistanis came under discussion. It is important to note that everyone in the hall stressed the need for political stability. A representative of the Financial Markets Association of Pakistan (FMAP) gave some interesting suggestions e.g. tagging imports with exports, balancing expenditures and income, rebate for overseas Pakistanis on their remittances that night increase remittances threefold. He also predicted significant devaluation of the rupee over the coming months.

Finally, the host, Sirajul Haq, the Jamaat-i-Islami ameer, gave his concluding remarks. He cited a former FBR chairman as saying that the national economy had already defaulted. He stated that in Islam both the market and the mosque were sacred and fraud and misappropriation were prohibited. He regretted that despite its extensive capability to produce agriculture goods, the country continued to face shortages. He said his experience as the KP finance minister had shown that deficit could be controlled by watching government expenditures.


The writer is an associate professor of management sciences and head of the Centre of Islamic Finance, COMSATS University (CUI) Lahore Campus.drabdussattar cuilahore.edu.pk



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