KARACHI: The government will go ahead with a programme to help low-income people to build and purchase their homes, signaling it is worried about a shortage of affordable housing in the country.
Finance Minister Miftah Ismail on Friday said all borrowers whose loan applications were approved and who had made advance payments will continue to receive loans under the Government Markup Subsidy Scheme (GMSS) or Mera Pakistan Mera Ghar from the banks. Additionally, he’ll ask the banks to lower the interest rate they charge.
The scheme is being revised to make it more accessible and affordable, and will soon be launched, the minister said. The low-cost subsidised housing finance and Prime Minister’s Kamyab Jawan youth entrepreneurship schemes, introduced in the ousted Prime Minister Imran Khan’s government, were officially suspended when the State Bank of Pakistan put on hold fresh disbursements amid a fast-changing macroeconomic environment. Banks were advised to stop extending these loans from July 1.
“Just had a meeting at the SBP. The government will continue with the MPMG [Mera Pakistan Mera Ghar] housing loan scheme for all those whose loan applications have been approved and who have paid advances (bayana). We will also ask the banks to reduce the interest rate charged,” Ismail said on its official Twitter handle.
“We are still in the process of reshaping the scheme to make it cheaper and more widespread. This revised scheme will be rolled out soon,” Ismail added.
Banks and borrowers await the SBP circular in this regard. Fahad Rauf, the head of research at Ismail Iqbal Securities said the focus of the government is to curb demand in the economy. The suspension of MPMG is a continuation of various steps taken to curb demand like an increase in interest rates, energy price adjustments, restrictions on imports, etc.
“Although Pakistan’s mortgage rate is very low as compared to regional and global levels, currently the focus is to survive the balance of payment crisis,” Rauf said. “In the longer term, the government will have to allow access to affordable housing finance in order to reduce the housing gap in the country,” Rauf added.
It was feared that the subsidies implemented in MPMG may become fiscally unsustainable if the economy deteriorates, even while loans already made under the programme would be grandfathered; it’s possible that new loans won’t be financially feasible.
The IMF, in its staff report released in February, asked the SBP to roll back housing finance measures that could pose risks to financial stability. The SBP increased the mandatory targets for housing finance for banks to 7 percent by December 2022.
In meeting with banks’ heads
Miftah discusses issues of Islamic banking, their solution
By our correspondent
KARACHI: Federal Minister for Finance Miftah Ismail on Friday held a meeting with the heads of the banks to discuss the implementation of the Shariah-compliant financial system in line with the Federal Shariat Court’s (FSC) judgment, which ruled that the country’s current interest-based banking system violates Islamic law and ordered the government to move towards an interest-free economy within five years, a source said.
The FSC had announced a judgment in the ‘Riba Case’ on April 28, 2022, however, the State Bank of Pakistan and four other banks had challenged the ruling in the Supreme Court the last month.
The SBP welcomed the judgment, however, it sought guidance from the honourable Shariat Appellate Bench of the Supreme Court in terms of implementation of some of the complex and challenging issues. A consultation process with the relevant stakeholders has been initiated by the government and the SBP to ensure the implementation of the FSC’s decision without impacting financial stability.
In this context, the finance minister chaired a meeting of the presidents of the banks to discuss the current issues faced by the Islamic banking and the way forward to resolve them, the source said.
“The heads of the banks were called to the State Bank of Pakistan by the finance minister, where he persuaded the four banks to drop their Supreme Court petition challenging the FSC’s decision, declaring the current interest-based banking system is against the Shariah and ordering the government to switch to an interest-free economy,” the source added.
“Mufti Muhammad Taqi Usmani, a well-known religious scholar, was also present in the meeting,” he added. Meanwhile, the prime minister has directed to constitute a task force to find out a way forward and concrete plan to eliminate ‘Riba’ from Pakistan in the light of FSC’s decision. The task force would assess and review the current state of Islamic financing system in the country.