The OIC Fiqh Academy's ruling on currency-related issues

MAY A SALARY BE INDEXED TO INFLATION - AND MAY A DEBT BE SWITCHED INTO ANOTHER CURRENCY? Two everyday questions for a riba-free household are whether an employment contract may lawfully raise pay in line with the cost of living, and whether a debt owed in one currency may be settled in another. Resolution No. 75 (6/8), adopted at the OIC Fiqh Academy's 8th session in Bandar Seri Begawan, Brunei (1-7 Muharram 1414H / 21-27 June 1993), is the Academy's settled, five-point answer. It is a decisive operative ruling, not a deferral. Its headline is a distinction the corpus's other currency rulings do not spell out: an ONGOING SALARY may be indexed to the cost of living, even though a FIXED STRUCK DEBT may not (Resolution 42) - and the resolution itself reconciles the two.

WHY THE ACADEMY RULED. The Council issued the resolution 'Having examined the research papers submitted to the Academy concerning Currency-related Issues' and 'Having listened to the discussions on the subject' (IRTI: 'Having considered the research papers received by the Academy as the subject; "Currency issues". Having listened to the debates on the subject.'). So this is a considered ruling on a live monetary question, decided at the same 8th session (Brunei, 1993) that also produced Resolution 76 on the problems of Islamic banks.

FIRST - A SALARY MAY BE INDEXED TO THE COST OF LIVING. This is the resolution's gem, and the point that distinguishes it from every other currency ruling in the corpus. Verbatim (official): 'It is permissible that professional statutes, bylaws, and regulations, and employment contracts, which include the definition of remuneration in currency figures, provided these are duly indexed, and that the indexation should not be prejudicial to the national economy.' (IRTI: 'Work statutes, rules and regulations, and employment contracts may include definition of remuneration in currency figures provided these are duly indexed, with the provided that the Indexation should not be prejudicial to the national economy.') The resolution then defines what it means. Verbatim (official): 'Indexation in this context means periodic adjustment of salaries in line with the progression of the living cost as may be assessed by experts and competent authorities.' (IRTI: 'Indexation in this context means periodical adjustment of salaries in line with the progression of the cost of living as may be assessed by the relevant and expert authority.') And it gives the purpose: 'protecting the workers' cash payments against any decline in the purchasing power that the wages afford due to currency inflation' (IRTI garbles this slightly as 'protecting the workers currency payments wages against any decrease in the purchasing power'). The permission rests on a general maxim of contract law. Verbatim (official): 'the primary ruling regarding contracts' conditions is permissibility, except those that permit something prohibited (haram) and prohibit something permissible (halal).' (IRTI: 'the governing principle with regard to conditions of contracts is that they are permissible, excepting those that authorize something prohibited (Haram) so prohibit something authorized (Halal).')

WHY THIS IS NOT A CONTRADICTION OF RESOLUTION 42. A reader who knows the corpus's Resolution 42 (4/5) will pause: did the Academy not rule that 'fixed debts, whatever their origin, are not permissible to be tied to the level of prices'? The resolution answers this in its OWN first point. Verbatim (official): 'In case of overdue salaries, or if they become accumulated debt, they are therefore subject to Shariah rulings applicable to debts as stipulated in the Academy resolution no. 42 (4/5).' (IRTI: 'In case of overdue salaries, the aggregate debt thus accumulated becomes subject to the provisions applicable to debts as stipulated in, the Academy's Resolution No. 42/4/5.') The line the Academy draws is precise: a salary that has NOT yet fallen due is a live, ongoing remuneration whose amount the contract may lawfully define with a cost-of-living indexation clause going forward - it is not yet a struck debt. But the MOMENT wages fall overdue and pile up as an accumulated debt, they become an ordinary money-debt, and the debt rule of Resolution 42 takes over: that fixed debt is settled at its like amount and may NOT then be re-indexed to the price level. Indexation is a permitted feature of the forward-looking wage; it is not a licence to inflate a debt already owed.

SECOND - A DEBT MAY BE SETTLED IN A DIFFERENT CURRENCY, BUT ONLY ON THE DAY, AT SPOT, IN FULL. Verbatim (official): 'It is permissible for the creditor and debtor to agree on the day of settlement - but not before - to the debt settlement in a currency other than the one specified for the debt, provided the exchange rate applied is that applicable on the settlement date.' The same is allowed for an installment: on the day that installment falls due, the parties may agree to pay it 'in full' in a different currency at the prevailing rate. The Shariah guardrail is possession (qabd). Verbatim (official): the 'conditional requirement in all cases is that no part of the amount subject of the currency exchange should remain outstanding, with due consideration to the Academy resolution no. 50 (1/6) regarding Qabd (taking possession).' (IRTI: '...no part of the amount subject of the currency exchange should remain outstanding, with due consideration to the Academy's Resolution No. 50/ 1 /6 .') The structure the Academy is protecting is bay al-sarf (currency exchange): the currency-for-currency conversion must be hand-to-hand and fully settled in the same sitting, with nothing left owing - which is exactly why the agreement must be struck ON the settlement day, not before (a currency swap agreed in advance for a future date would be a deferred sarf, which the corpus's forex ruling, Resolution 102, does not allow).

A DISCLOSED CROSS-REFERENCE QUIRK. Both editions cite 'Resolution No. 50 (1/6)' at this point, and the official edition glosses it 'regarding Qabd (taking possession)'. In the Academy's own index, however, Resolution 50 (1/6) is 'Real Estate Financing for Housing Construction and Purchase', while the Academy's dedicated ruling on Qabd (taking possession) is Resolution 53 (4/6). The number-to-topic pairing as printed is therefore the source's own, and is reproduced here rather than silently corrected; the possession principle the clause invokes is, in substance, the qabd doctrine the corpus anchors at Resolution 53.

THIRD - THE PARTIES MAY FIX THE SETTLEMENT CURRENCY (OR GOLD) UP FRONT. Verbatim (official): 'It is permissible for both parties of the contract, at the time of contracting, to agree on the settlement of the deferred cost or salary in a specific currency to be settled in single payment or in several well-defined installments in a variety of currencies or against a given amount of gold.' (IRTI: 'The two parties to the contract may, at the time of contracting, agree to the settlement of the deferred cost or salary in a specific currency to be settled in using payment or in several well - defined installments in a variety of currencies or against a given amount of gold' - the IRTI edition's 'using payment' is a garble of the official 'single payment', reproduced not corrected.) This is the up-front analogue of the second point: the parties may PICK, at the outset, a specific currency (or a defined weight of gold) as the unit in which a deferred price or salary will ultimately be paid - a lawful choice of a stable unit of account, in the same spirit as the corpus's Resolution 115, which likewise lets parties denominate up front in a more stable unit rather than index a struck debt after the fact.

FOURTH - BUT YOU MAY NOT SECRETLY DENOMINATE A DEBT IN GOLD'S COUNTER-VALUE. The fourth point closes the obvious loophole. Verbatim (official): 'It is not permissible to agree on recording the debt resulted from a specific currency against the debtor in its counter-value in gold or other currencies because such a practice would make it compulsory to the debtor to settle the debt in gold or the other currency.' (IRTI: 'A debt contracted in a specific currency should not be recorded against the debtor in its countervalue in gold or other currencies because such a practice would make it compulsory to the debtor to settle the debt in gold or the other currency, as agreed upon for the settlement.') The distinction from the third point is fine but real: it is lawful to AGREE openly at contracting to settle in gold (point 3); it is NOT lawful to lend or owe in one currency and then RECORD the obligation as its gold-equivalent so that the debtor is forced to repay the value of that gold - because that converts a fixed money-debt into a gold-indexed one, the very inflation-proofing of a struck debt that Resolution 42 forbids. The line is: choose the settlement asset honestly and openly, or owe the currency at par; do not disguise a gold-indexed debt as a currency debt.

FIFTH - AND IT REITERATES RESOLUTION 42. Verbatim (official): 'Reiterating the Academy resolution no. 42 (4/5) concerning The Changing Value of Currency (rates fluctuations).' (IRTI: 'To reiterate Resolution No. 42/4/5 issued by the Academy concerning fluctuation in currency value.') The fifth point makes the anchoring explicit: everything in Resolution 75 is built on, and consistent with, the settled norm of Resolution 42 that a fixed debt is repaid in its like amount and not tied to the price level.

THE PRINCIPLE UNDERNEATH ALL FIVE. Read together, the five points draw one coherent line through the life of a currency obligation: while a wage is still a forward-looking remuneration, its amount may be defined with a cost-of-living indexation clause (point 1); while a debt is being settled, the parties may honestly agree - openly, at contracting, or on the settlement day itself - to use a different currency or gold, provided the exchange is spot and complete (points 2-3); but a fixed struck debt may never be covertly re-denominated into gold or another currency to inflation-proof it (point 4), because a struck debt is settled at par under Resolution 42 (points 1 and 5). The permission attaches to the LIVE, forward-looking obligation and to the HONEST, fully-possessed exchange; the prohibition attaches to the FIXED, already-owed debt and to the DISGUISED indexation.

HOW A RIBA-FREE HOUSEHOLD ACTUALLY USES THIS. (a) An employment contract or salary scale MAY include a cost-of-living (inflation) indexation clause - annual reviews that lift pay in line with rising prices are lawful, and are in fact framed as protecting the worker's purchasing power (point 1); this is a genuine permission a Muslim employee or employer can rely on. (b) But once your employer's salary payments fall OVERDUE and become a debt they owe you, that debt is settled at its face amount under the ordinary debt rules; you cannot demand it be re-indexed upward for the delay (point 1 tail + Resolution 42). (c) If you owe someone in, say, one currency and both of you agree ON THE DAY to settle in another currency at that day's rate with nothing left owing, that is permissible (point 2) - but a pre-agreed future currency swap is not, because it becomes a deferred currency sale. (d) You may agree at the outset that a deferred price or salary will be paid in a named currency or in a set weight of gold (point 3) - a lawful way to pick a stable unit up front. (e) What you may NOT do is lend or borrow money and quietly book the debt as 'so many grams of gold' so the borrower must repay the gold's value: that is a forbidden indexation of a struck debt in disguise (point 4). (f) This ruling governs currency, salary and debt DENOMINATION; it does not bless any interest (riba) charged for lending or for late payment, which the corpus's riba rulings judge separately.

WHERE THIS SITS IN THE CORPUS. Resolution 75 is the corpus's SALARY-AND-SETTLEMENT currency ruling - the practical companion to the more foundational monetary resolutions. It builds directly on Resolution 42 (4/5) (a fixed debt is repaid at its like amount, not indexed to prices), which it cites twice and reiterates in full; it presupposes Resolution 21 (9/3) (paper money is real money, ribawi); it hands the qabd/full-possession requirement of its currency-exchange clause to the doctrine the corpus anchors at Resolution 53 (4/6) (Qabd); its 'agree at contracting on a stable unit' move is the same one the corpus reads in Resolution 115 (9/12) (inflation and the changing value of currency); and its ban on deferred, disguised currency conversion is consistent with Resolution 102 (5/11) (forex / currency trading). The corpus's own record shows Resolution 75 is settled OIC law that later resolutions lean on: Resolution 115 (9/12) and the 12th-session monetary resolutions expressly recall and reconfirm it. Distinctively, Resolution 75 is the only currency ruling in the corpus that speaks to SALARIES and WAGES rather than to trading, lending or the price level as such.

GENUINE DIFFERENCES BETWEEN THE TWO EDITIONS (disclosed, not smoothed). The two translations agree on all five operative points while differing in wording - a CLEAN pairing (points 1-5 carried identically, no substantive discrepancy), reported honestly. TITLE: official body heading 'Currencies-related Issues' (its OWN preamble line, however, reads 'concerning Currency-related Issues') versus IRTI 'Concerning Currency Issues'. ACADEMY NAME: official 'the International Islamic Fiqh Academy of the Organization of the Islamic Conference' versus IRTI 'the Islamic Fiqh Academy'. POINT 1 - the indexation authority: official 'as may be assessed by experts and competent authorities' versus IRTI 'as may be assessed by the relevant and expert authority'; and 'periodic' versus IRTI 'periodical'. POINT 1 - the protection clause: official 'protecting the workers' cash payments' versus IRTI 'protecting the workers currency payments wages' (an IRTI garble, reproduced not corrected); official 'against any decline in the purchasing power' versus IRTI 'against any decrease in the purchasing power'. POINT 1 - the maxim: official 'the primary ruling regarding contracts' conditions is permissibility, except those that permit something prohibited (haram) and prohibit something permissible (halal)' versus IRTI 'the governing principle with regard to conditions of contracts is that they are permissible, excepting those that authorize something prohibited (Haram) so prohibit something authorized (Halal)' (the official prints haram/halal with diacritics as '(haram)'/'(halal)'; rendered here diacritic-free). POINT 2 - the cross-reference: both cite 'Resolution No. 50 (1/6)'; the official adds the gloss 'regarding Qabd (taking possession)', the IRTI does not (and the actual OIC Qabd ruling is Resolution 53 (4/6), disclosed above). POINT 3: official 'to be settled in single payment' versus IRTI 'to be settled in using payment' (IRTI garble). POINT 5: official 'concerning The Changing Value of Currency (rates fluctuations)' versus IRTI 'concerning fluctuation in currency value'. RECOMMENDATIONS: official 'legal currencies such as the Islamic Dinar' versus IRTI 'a hypothetical currency such as the Islamic Dinar'. CLOSING: official 'Indeed, Allah is All-Knowing.' versus IRTI 'Allah, though, knows best.' SPELLING throughout: official 'Shariah' versus IRTI 'Shari'a'. Every verbatim quote used above was machine-checked against both source PDFs (line-wrap, hyphenation, inserted-page-number and diacritic aware, whitespace-normalised, 25/25 OK).

AN HONEST NOTE ON WHAT IS AND IS NOT HERE. This is a settled operative ruling - five decisive points on salary indexation, currency-of-settlement and the recording of debts - not a deferral. The quoted parts are the resolution's own words; the framing questions ('may pay be indexed to inflation', 'may a debt be settled in another currency'), the modern examples (employment contracts, cost-of-living pay reviews, currency swaps), and the household how-to are plain restatements and honest applications of the resolution's own five points, not new rulings added by this site. The resolution cites no Qur'an verse and no hadith number, records no madhab tally and no vote count, and names no bank, product, figure or rate, so none is reported here; its Recommendations list (future study of a legal/Islamic-Dinar currency in Islamic Development Bank transactions, alternative indexing methods, banknote 'stagnation', and inflation thresholds) is reported as the resolution's own recommendation for future work, not as an operative ruling. The cross-links to Resolutions 42, 21, 53, 115 and 102 are this corpus's own mapping of where a salary-and-settlement currency ruling sits, offered as navigation, not as claims made by Resolution 75 itself.