The federal and provincial governments will begin raising all new domestic and international financing through Shariah-compliant instruments from 2028 as part of Pakistan’s plan to transition to a Riba-free financial system, according to the Ministry of Finance.
The policy is outlined in the ministry’s Strategy Paper: Post-2027 Financial System in Pakistan, which states that all government borrowing after December 2027 will be carried out using Islamic financing modes. Existing conventional loans and financing agreements, however, will remain in place until their maturity before being gradually replaced with Shariah-compliant alternatives.
The strategy identifies the conversion of the government’s existing debt portfolio as one of the biggest challenges in implementing the new financial system. To facilitate the transition, the Finance Division plans to establish an Asset Registry Company that will hold public assets for the issuance of sovereign Sukuk. The government also intends to introduce a regular Sukuk issuance framework along with an annual issuance calendar.
The report further states that the State Bank of Pakistan (SBP), in collaboration with commercial banks, is in the final stages of developing three-month and six-month Sukuk to strengthen liquidity management. The framework is expected to be completed before the end of 2027.
As part of the broader transition, the government plans to amend federal and provincial laws to create a comprehensive legal framework supporting Islamic finance. The ministry noted that most conventional banks already possess the technological infrastructure required for the shift through their existing Islamic banking operations, while training programs are being conducted to prepare banking professionals for the transition.
The State Bank will also gradually move towards implementing monetary policy using Shariah-compliant financial instruments.
According to the strategy paper, the federal government, the SBP, the Securities and Exchange Commission of Pakistan (SECP), and other relevant stakeholders will jointly oversee the transition by introducing legislative reforms, expanding Sukuk-based financing, strengthening regulatory oversight, and building institutional capacity to ensure a smooth transition to a fully Islamic, interest-free financial system after 2027.
