Fiscal Policy Tools In An Islamic Framework

The framework of Islamic economics has the unique feature of providing for social economic justice in the economy. The abolition of interest, entrenchment of Zakat and the emphasis on social welfare provide the level ground for attaining the goals in an Islamic state. Human conducts are not entirely guided by self-interest but constrained by the provision of the Shari’ah. Spirituality is emphasized in an Islamic economy. The effectiveness of any policy would invariably be adjudged by its level of compliance with tenets of Islam.

Every economy is at one point or the other subject to cyclical fluctuations in business or economic activities. Fiscal and monetary actions are the basic policy options open to the state in the phases of business or economic fluctuations. Fiscal p...