RESOLUTION NO. 89/6/9
CONCERNING ‘CURRENCY ISSUES’

Compiled By:
Prof. Dr. Mohd. Ma’sum Billah
masum2001@yahoo.com
masum@applied-islamicfinance.com
+6019-3699542

Quote-The Council of the Islamic Fiqh Academy, holding its Ninth session, in Abu Dhabi, State of the United Arab Emirates, from 1 to 6 Dhul Qi’da 1415H (1-6 April, 1995)

Having considered the research papers forwarded to the Academy on the subject of “Currency issues”.

Having listened to the debate from which it emerged that there are more than one direction concerning ways to deal with cases of over inflation which lead to the serious decline in the purchasing power of certain currencies, such as when;

a)      These exceptional cases also fall under the Academy’s resolution issued at its fifth session and stipulating that the norm in the settlement of debt incurred in a specific currency is that it should be settled in the same (currency), rather than in value terms, for debts must be settled in an identical resource, and fixed debts, whatever their origin, may not be tied to the level of prices”

b)      The principle of Indexation of the cost of living (taking into consideration the purchasing power of currencies) is applied in such exceptional cases.
c)      The principle of Indexation  of bank notes to gold (referring to the currency’s value in gold on maturity date).
d)      The principle of mandatory agreement in honor is applied, after definition of damages incurred by the two parties (debtor and creditor).
e)      A distinction is established between the drop in currency value through market forces of offer and demand, and the state devaluing its currency through a clear decision in such a manner that the paper currency’s value which is normative and prescriptive may alter.
f)      A distinction is drawn between the drop in the currency’s purchasing power occasioned by Government policies and that occasioned by external factors.
g)      The principle of (cases of catastrophe) which falls under the concept of consideration of emergency circumstances, is applied to such exceptional instances.

In the light of these discrepant views which need to be duly studied and scrutinized,

THE COUNCIL RESOLVES:

First:  That the Academy’s General Secretariat  in collaboration with one of the Islamic financial institutions  should hold a specialized seminar that would bring together a number of specialists in the fields of economy and Fiqh and include some experts and members from the Academy, to explore the soundest and most appropriate way that may be agreed upon for the settlement of debts and commitments under the exceptional circumstances as mentioned above.

Second: That the symposium’s agenda should include:

a)      Exploration of the notion of inflation and its various types as well as all technical conceptions relating to it.

b)      Exploration of the economic and social effects of inflation and economic solutions for them.
c)      Submission of Fiqh solutions to deal with inflation instances as mentioned in the preamble of the present resolution.
Third: That the symposium’s findings  together with the papers and minutes of the deliberations  should be submitted to Academy’s Council at its next session.

Allah knows best  Unquote

(Source: "Resolution and Recommendations of the Council of the Islamic Fiqh Academy (1985-2000)” , IRTI.)