In the Name of Allāh,
the Entirely Merciful, the Especially Merciful
Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.
Resolution No. 89 (6/9) Currency-related Issues
The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 9th session in Abu Dhabi, United Arab Emirates, on 1–6 Dhū al-Qi’dah 1415h (1–6 April 1995),
Having examined the research papers submitted to the Academy concern- ing Currency-related Issues,
Having listened to the discussions highlighting that there are several di- rections to deal with the various cases of hyperinflation which lead to a serious decline in the purchasing power of some currencies, including:
- Such exceptional cases also fall under the Academy resolution no. 42 (4/5) issued at its fifth session stipulating: “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, are not permissible to be tied to the level of prices.”
- The principle of indexation to the living cost shall be applied in such exceptional cases (taking into consideration the purchasing power of currencies).
- The principle of indexation of banknotes to gold (referring to the currency’s value in gold on maturity date).
- The principle of mandatory agreement in honor is applied, after definition of damages incurred by the two parties (debtor and creditor).
- A distinction shall be made between the decline in currency value through market forces of offer and demand, and the State devaluating its currency through a clear decision in such a manner that the paper currency’s value which is normative and prescriptive may alter.
- A distinction shall be made between the decline in the currency’s purchasing power occasioned by government policies and that occasioned by external factors.
- The principle of “cases of catastrophe” that falls under the consideration
of emergency circumstances shall be applied to these exceptional cases.
In light of these disparate opinions, which need to be duly studied and examined,
First: The Academy – in collaboration with one of the Islamic financial insti- tutions – should organize a specialized symposium that would bring together several specialists in the fields of economics and Fiqh, including some of the Academy’s experts and members, to explore the most sound and appropriate ways that could be agreed upon for the settlement of debts and the commit- ments in the aforementioned exceptional circumstances.
Second: The symposium’s agenda should include:
- Study of the concept of inflation, its different types, and its technical
- Study of the economic and social effects of inflation and their economic
- Submit Fiqh solutions to solve inflation as mentioned in the preamble of this resolution.
Third: The conclusions of the symposium – together with its papers and minutes – shall be submitted to the Council of the Academy at its next session.
Indeed, Allāh is the Giver of success.