Inflationary Adjustments
Economic Issues
Question asked by .
Answered by Dr. Shehzad Saleem

I keep my money in a current account so that I may avoid interest. However, the funds do depreciate due to inflation. Does Islam recognise inflation and how does it compensate for devaluation and depreciation due to inflationary pressures?


Money in the form of paper currency has originated in the last few centuries. The issue of depreciation due to inflation has arisen because of the very nature of paper currency. Prior to this, goods were bought and sold on the basis of real commodities like gold and silver coins for example, and there was no ‘false’ depreciation. However, today, this change in situation certainly calls for some corrective measures.

As such, in my opinion, there seems no reason for Islam to disregard inflation and depreciation of paper currency. Whether this measure will actually root out inflation may be debatable, but the point however is that the nature and extent of the corrective measure is such that it requires state authority. Only a state has the power to bind financial institutions and other sectors of the economy to make inflationary adjustments. The common man, you would perhaps agree, cannot do this. Therefore, unless the state realises this problem, nothing much can practically be done.


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