Is interest a compensation for inflation ? : effect of inflation on long term debts

Fatawa Question

As Salamu Alaikum. I was married in November, 1995, and the dower that was agreed upon was Pakistani Rupees 100,000 in current currency (Muajjal). We now live in the US, and at this time, I would like to pay my wife that amount in US dollars. However, I am confused about the "current currency" part of it. According to the current exchange rate, Rs.100,000 = US $ 1670. But I believe that in November 1995 the exchange rate was such that Rs.100,000 = U.S. $ 2860. I am not sure which of these is the right amount. Perhaps I am supposed to account for the inflation rate as well (For example, if Rs.100,000 back then have the same purchasing power as Rs.150,000 in current times, then I am supposed to pay her Rs.150,000 converted into U.S. dollars at the current rate of about 60 rupees to the dollar).

Fatwa

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Publication Date

2001-02-28

Main Subjects

Economics & Business Administration
Religion
Islamic Studies

Topics

• Islamic jurisprudence
• Islamic economics
• Inflation(Finance)
• Exchange rates
• Foreign exchange
• Debts
• Pakistan
• United States
• Dowry
• Usury

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-723997

• APA
• MLA
• AMA