By 2032, 93% of Pakistan's budget will vanish into debt

The Mufti Taqi Usmani fatwa that reopened the crypto debate

Muzamil opens by framing a fresh controversy. Mufti Taqi Usmani, one of Pakistan’s most influential authorities on Islamic finance and a board figure at Meezan Bank, has issued a short written fatwa in response to a student who asked whether he could pay his tuition in crypto. The ruling: cryptocurrency does not qualify as “maal” and is therefore impermissible.

Qanit Khalilullah, returning for his third appearance, treats the fatwa carefully but questions its narrowness. “Maal ki definition mein nahi aata,” he summarises — but points out the ruling gives no detailed reasoning. Intangible assets, he notes, now make up 70–80 percent of the valuation of the world’s top 500 companies. Patents, brand equity, goodwill — none of it is physically tangible, yet all of it is treated as wealth.

For Qanit, the sharper objection to Bitcoin isn’t its intangibility. It’s that Bitcoin fails the basic definition of a currency on two counts: it isn’t functioning as a medium of exchange, and it isn’t stable enough to serve as a store of value.

Why Bitcoin fails as a currency in Qanit’s view

Qanit cites a US survey suggesting only around 2 percent of Bitcoin activity is transactional. “98% log uski value badhne ka intezaar kar rahe hain,” he says — 98 percent of people are waiting for the price to rise. That, in his framework, is speculation, not currency.

He extends the same logic to gold. Gold as a circulating currency, he argues, hasn’t really been used since the 15th or 16th century. What existed after that was the gold standard — paper receipts backed partially by gold reserves — not gold itself functioning as money. He invokes Imam Ghazali’s description of currency as a mirror that has no value of its own but reflects the value of other things. Neither Bitcoin nor gold, he insists, plays that role today.

He raises a further objection specific to Bitcoin: environmental cost. Bitcoin mining, he notes, consumes more electricity than countries like Argentina or Egypt and generates roughly 40 million tons of emissions — a heavy price for a decentralised ledger whose primary function, peer-to-peer payment verification, can be done more simply through centralised systems.

Muzamil’s counter: Bitcoin as a hedge, not a currency

Muzamil offers an alternate frame. He argues that the serious Bitcoin holders in the US are no longer buying it speculatively — they’re buying it as a hedge against dollar liquidity expansion. If you plot Bitcoin’s price against total global dollar liquidity, he says, the two graphs are almost identical.

“Vo is wajah se khareed rahe hain kyunki vo tang aa chuke hain dollar se,” Muzamil says. Wall Street bankers print money at will, create inflation at will, and ordinary people have no defence. Bitcoin, being finite and verifiable, becomes the simplest hedge available.

He extends the argument to gold. If gold’s price were allowed to move freely without central bank suppression, it would fluctuate just as wildly — and recently, as prices unlocked, it did move sharply. “Toh agar Bitcoin ko maine kaha hai ke vo galat hai to phir gold bhi galat hona chahiye,” Muzamil argues. Why single out one and not the other?

Qanit accepts the parallel partially. Yes, as an individual investment, gold, stocks, real estate and even crypto will outpace a currency losing 15 percent of its value annually. But that, he insists, is an individualist answer that does nothing for the 100 million Pakistanis trapped at the bottom.

The elephant in the room: fractional reserve banking

This is where Qanit pivots to what he calls the actual issue. Crypto transactions in Pakistan probably don’t even amount to half a percent of total activity. The real problem is the 90-plus percent of transactions running through bank-created money — money conjured out of thin air, with debt attached.

Muzamil provides the numbers. In June 2023, Pakistan’s total money supply stood at 29.28 trillion rupees. By June 2026, that figure had climbed to 46.86 trillion — a roughly 50 percent expansion in three years, against negligible productivity growth. “Vo 50% extra cash hai vo kidhar gaya hai? Vo kiske haath mein gaya hai?” he asks.

Qanit’s answer is uncomfortable. Every month, the Government of Pakistan borrows roughly 500 billion rupees from commercial banks — and hands it straight back as interest on existing debt. “Ek haath se aapne loan liya aur agle haath se interest mein wapas kiya.” To scale it, he notes 500 billion rupees is roughly the combined cost of the metro bus projects in Lahore, Karachi, Islamabad and Peshawar — happening every single month.

Domestic debt has ballooned from 5 trillion to 55 trillion rupees in fifteen years. Debt servicing, he says, now runs at roughly three times the defence budget. The federal government begins each fiscal year already in the red after transferring 60 percent to provinces under the 18th Amendment and paying roughly 50 percent as interest.

The 2032 cliff

The sharpest moment comes when Muzamil recounts a 2024 presentation by the DG Budgets of the Pakistan Army. The army had run its own projection: if the current trajectory continues, by 2032, 93 percent of Pakistan’s entire federal budget will be consumed by debt servicing.

“Unhone dikhaya ke 2032 baay 93% of your entire federal budget will be consumed by debt,” Muzamil recalls. His reaction wasn’t reassurance — it was frustration. The institution most invested in state stability has run the numbers, sees the cliff, and yet has no alternative on the table because it keeps outsourcing economic policy to bankers.

Qanit agrees. He notes that the army’s own share of federal tax revenue has shrunk from around 20–22 percent in 1998 to roughly 15 percent today — not because defence spending fell, but because interest ate the space. Every stakeholder in Pakistan — federal government, military, provincial governments — is losing ground to a single line item: interest paid to commercial banks and their depositors.

The full reserve banking proposal

Qanit’s core proposal, laid out in Breaking the Trap of Debt, Inflation, Interest and Poverty, is to shift Pakistan from fractional reserve banking to full reserve banking. Under full reserve, commercial banks would hold 100 percent reserves against deposits at the State Bank, rather than the current 5 percent. Private money creation ends. Banks still function, but split cleanly: a payments business earning fees on transactions, and an investment business lending only against real savings.

The mechanism to cancel existing debt is what he calls elegant. Because banks currently hold 70–80 percent of their assets as government bonds, T-bills and sukuk, forcing them to move to full reserves would transfer those instruments to the State Bank. “Seamless tareeqe se yeh transfer ho jayenge State Bank ke paas. Aur State Bank jo hai vo government ki jeb hai. Uske baad hamara proposal yeh hai ki isko aap cancel out kar dein.”

Debt cancelled. Budget deficit closes. Government stops borrowing. Money supply stabilises. Inflation collapses. He cites Irving Fisher and Milton Friedman as intellectual precedents — both argued full reserve banking could be implemented within weeks without adverse impact on capital markets.

Going forward, new money creation would happen only through the State Bank, tied to real GDP growth of around 4 percent, and issued without debt attached. Qanit estimates this could generate roughly 2,000 billion rupees annually in seigniorage — enough, he calculates, to give every poor family in Pakistan a monthly stipend.

Why the bankers won’t let go

Muzamil presses the harder question. If the solution is this simple, why hasn’t it happened? “Bankers are making bank. Amir aadmi paise bana raha hai. Gareeb aadmi kaun sochta hai?”

Qanit quotes Milton Friedman on why full reserve banking never gets implemented: first, ordinary people don’t understand who creates money and how; second, the financial sector — despite contributing only around 2.5 percent to GDP in Pakistan — won’t voluntarily surrender the power to create money.

Muzamil raises a pattern he’s watched for years: Pakistan’s finance ministers almost always come from banking. Not because banking prepares one to run an economy, but because bankers control the narrative long enough to protect the system during their tenure. “Vahi banker aakar kaan bharta hai,” Muzamil says. “Sir ye toh saara chuna laga rahe the aapko.”

Qanit’s advocacy strategy has evolved accordingly. He started with newspaper articles in 2024, moved to social media, then organised article competitions across 30–40 universities, and eventually spent six months co-writing the book with Shoaib Umar, an advisor at the Central Bank of Bahrain. The book has been reviewed by roughly 20 economists and bankers. The Deputy Chairman of Faysal Bank wrote its foreword, describing how 45 years in banking hadn’t shown him what the book laid out. Arif Habib Group’s Nasim Beg wrote back-cover endorsements. Copies have gone to the State Bank, to deputy governors, to the Ministry of Finance — though Qanit admits the Ministry is effectively captured by the IMF’s framework.

Why the ulema haven’t touched the real question

Qanit’s frustration with the ulema is specific: they focus on the surface of Islamic banking — whether a product is structured as murabaha or musharaka — while ignoring whether creating money out of thin air with debt attached is itself riba.

“Agar 5 rupaye ex lena agar riba hai to 100 rupaye hawa mein create karna yeh kya cheez hai?” he asks. If charging a small excess on a loan is riba, what is conjuring a hundred rupees from nothing? The harm is greater, the injustice is systemic, and it violates the broader maqasid al-shariah around public interest and preventing zulm.

He plans to formally submit a written question to Darul Ifta seeking a specific ruling on fractional reserve banking itself — not on crypto, not on the surface products, but on the underlying mechanism. He’s also considering a constitutional petition. If a private citizen printing a 5,000-rupee note gets ten years, on what basis are commercial banks legally permitted to create equivalent value through digital entries?

The debate that refuses to close

By the end of the conversation, the two positions haven’t reconciled. Muzamil, self-described as having become “too much of a cynic” to expect the rich and powerful to voluntarily surrender their advantage, argues that the only realistic path is mass rejection — people quietly exiting fiat by moving into gold and crypto, forcing the system to respond.

Qanit maintains the reformist position. The technical solution exists. The intellectual precedent exists. The book exists. What’s missing is advocacy reaching the three stakeholders who can actually move — the military leadership, the federal government, and the religious authorities. He notes the courts may be a last resort, precisely because they force a conversation that routine bureaucratic channels avoid.

Muzamil closes closer to admiration than agreement. He tells Qanit he is among very few Pakistanis willing to do the thankless, expensive work of educating a public that consumes ideas cheaply and often demeans the messenger. “Aaj shayad nahi, but history mein aapka kahin na kahin naam likha jayega for the effort that you are doing.”

The book’s link, Muzamil promises, will go directly in the description — no more nested redirects that lost readers last time.