Foreign banks threaten to pull out if forced to implement interest-free regime, Senate panel told

Amid reports that foreign banks, including those from China, may find it difficult to operate in Pakistan after the financial system becomes fully compliant with Sharia, the central bank has conceded challenges related to public debt, foreign banks, external debt commitments and monetary policy that would need to be addressed by a steering committee of all stakeholders under a five-year transformation plan. Presiding over a meeting of the Senate Standing Committee on Finance and Revenue, former finance minister and PPP senator Saleem Mandviwalla said he had received letters from foreign banks, including the Bank of China, that they would be unable to operate if interest-free banking was implemented in Pakistan. Though an overwhelming majority of the senators supported a shift to the Islamic financial system, they advised a cautious tread to avoid disruptions while maximising the outreach to integrate into the global system with cooperation from Malaysia, Bahrain and London. The committee asked the State Bank of Pakistan (SBP) and the finance ministry to engage with the Bank of China and the Industrial and Commercial Bank of China, who entered Pakistan after much effort.