Qanit Khalilullah

Education

Khalilullah qualified as a chartered accountant with Ferguson in Karachi. He holds Chartered and Management Accountancy qualifications from institutes in the United Kingdom and Pakistan. [1][3]

Career

Khalilullah describes himself as a chartered accountant by profession. He spent two years in tax consulting. He joined Unilever Pakistan and spent almost 10 years there, including as head of audit, internal audit. In 2008 he moved to Islamabad. He says he was EVP finance at Ufone. [3]

He has served on the boards of profit and non-profit organisations. His expertise covers financial planning, strategy, reporting, tax planning, assurance, compliance and supply chain management. [3]

Breaking the Trap

Khalilullah says he first wrote about the subject in a three-part article in 2024, and a detailed article by him has been published in three parts. He left his consulting work for five to six months to focus on the book. He says the book came out around March. He says the book was not written for financial specialists. [1][2][3]

The book was reviewed by 20 economists and bankers, including the deputy chairman of Faysal Bank and Arif Habib. Khalilullah says the deputy chairman of Faysal Bank wrote its foreword. [1]

Khalilullah says seminars were held at about 30 to 40 universities, and that copies of the book were also sent to the State Bank. He says he has presented the proposal at three institutions and has recorded around 15 more videos on this topic. He says he has done substantial work on the subject and currently gives lectures at universities. [1][2][3]

He says he plans to focus more on advocacy now that the book is out. He says he may take the money creation question to court. [1]

Views on money creation

Khalilullah says banks create money under today's system, fractional reserve banking. He says central banks create only base money, and commercial banks create the rest. He explains that with a 5 percent reserve, a bank can create about 20 times its deposit as new money, and says a bank's loan of one crore rupees after taking security is new money. He says private banks create about 90 percent of new money. [2][3]

He says about 90 percent of money is created with debt, and that about 97 percent of money today exists as bank numbers rather than cash. He says that in 2026 over 95% of the value of transactions worldwide is recorded as bank numbers, and that over 90% of transactions run through bank money. He says sovereign currency is issued by the central government as hard money. [1][2][3]

Khalilullah describes private money creation as the root of the problem. He says new money reaches the financial sector and wealthy people first, not ordinary people. He argues that money is a public good that should not be handed to the private sector. He says the state has historically been the one to create money, and that through most of history money was issued by the state. [1][2]

He says the State Bank's policy rate is the source of interest rates across the economy. He says interest rates are raised in order to stop money supply growth. He says Pakistani textile companies made large investments when rates were low in 2021-22. He says reserve ratios have hardly been used for 40 to 50 years. [2][3]

The full reserve proposal

Khalilullah says the solution is to move from fractional reserve to full reserve banking. He says commercial banks should stop creating money privately and the state should take back the power to create money. He says full reserve would require banks to hold 100% reserves instead of the 5% they now keep at the central bank, and that banks could not create money beyond their State Bank balances. [1][2][3]

He proposes that new money be created without debt, and says the money created under his proposal would not be created with debt. He says that under his proposal money would be created in line with GDP growth, for example 4% new money when growth is 4%. He says his proposal would limit money growth to long-term GDP growth of about 4 to 5 percent. He proposes a committee in which both the government and the opposition sit, working with public announcements. [2][3]

Khalilullah says the proposal would eliminate government debt, and that government debt would be cleared within one or two years. He says the government's domestic debt would be eliminated under the full reserve plan, and argues the proposal would eliminate Pakistan's domestic debt. He says the proposal aims to eliminate Pakistan's debt. He says private debt would remain after the transition, and that existing contracts would be honoured during the transition. [2][3]

He says full reserve banking could be put in place within a week or two. He says he is strongly convinced the proposal can be implemented smoothly, and that he has not yet seen any technical problem with it. He cites Milton Friedman as saying full reserve banking could be implemented overnight, and says it is backed by economists Irving Fisher and Milton Friedman. He says Irving Fisher also argued for eliminating debt. [1][2][3]

Khalilullah says full reserve banking would structurally end bank runs, and that under full reserve the State Bank would control money directly, not through interest rates. He says banks do two jobs, storing and transacting money and investing or lending it, and that there is friction between them. He says money in bank investment accounts would carry risk. He calls central bank digital money a good concept, but says it would end innovation in banking. [2]

Views on debt and inflation

Khalilullah argues that Pakistan's debt-based banking system is a bigger trap than cryptocurrency. He argues the debt-based system is a Ponzi scheme, much bigger than anything in cryptocurrency. He says Pakistan's domestic debt rose from 5 trillion to 55 trillion rupees in 15 years. He says Pakistan's interest cost is about 6 to 7 trillion rupees, and that about 90% of it is on domestic debt. [1][2][3]

He says about 60% of tax revenue goes to interest payments, and that the interest paid on this debt ends up with banks. He says the government takes loans of 400 to 500 billion rupees from banks. He cites a Dawn report saying 98% of banks' extra lending went to the government to repay interest, and says about 98 percent of the loans the banking sector gave in the preceding year went to the government. He says that by 2032, 93% of the entire federal budget will be consumed by debt payments and interest. [1][3]

He says the debt will have to be repaid by future generations. He says interest is the biggest expense and could be ended immediately. He says Pakistan's economic conditions come from policy choices, not fixed circumstances, and that people should discuss this topic because a solution exists. [2][3]

Khalilullah says Pakistan's total currency supply rose from 29.28 trillion in June 2023 to 46.86 trillion in June 2026. He says money supply has grown about 15% a year over 50 years, roughly 1200 times in total, while actual output has grown only about nine to ten times. He says there is no logic in creating 20% money growth when long-term growth is 4%. He says one cause of inflation is that money supply is increased by 20 percent while production of goods and services grows 2.5 to 3 percent. He calls inflation a tax imposed without representation. [1][2][3]

He says everything has become about 100 times more expensive, and that salaries lose purchasing power every year. He says savers and retirees on fixed incomes lose out when inflation cuts their purchasing power, while asset owners gain when inflation rises because asset prices go up. He says savings accounts currently pay about 7 to 8%, that if savers get 7% they still lose 10 to 12%, and that money's value is falling about 15% a year today. [2]

He says UK money supply grew about 7 to 10% a year from 1970, that US money creation grew about 50 times over the past 50 years, and that US household debt was close to zero in the 1950s. He says the line between savings and current accounts has blurred over the past 50 years, and that checking accounts count as money under the M1 and M2 definitions. He says Pakistan's banks hold about 30 trillion rupees in deposits. [2][3]

Views on Islamic finance

Khalilullah says he read about full reserve banking and found it very close to Islam's true objectives. He says full reserve banking is close to Islamic ideals because it creates money without debt. He argues fractional reserve banking is a modern form of riba, and describes abolishing riba as Islam's monetary policy. [2][3]

He says Islamic banks also create new money, so they face the same problem, and that they also hold money creation power. He says Islamic banks must link their contract profit rates to the State Bank policy rate, and that Islamic banking contracts are linked to the State Bank's discount rate. He says one interest rate sets rates across the economy, and Islamic bank contracts depend on it. He says that under fractional reserve, Islamic banks cannot do profit and loss sharing if they want to, and that Islamic banks' murabaha contracts are debt-based in practice. [1][2][3]

He says Islamic finance does the same work inside an attractive wrapper. He favours profit-and-loss sharing. He says market economy brings innovation and benefits, which Islam supports, and that Islam's remedies are the zakat system and the real end of riba. [1][3]

Views on zakat and taxation

Khalilullah says zakat is Islam's fiscal policy, setting what to collect and what to spend. He says the purpose of zakat is to end poverty, and that modern economics shows zakat helps grow the whole economy. He says the second meaning of zakat is growth, and that focus should be on distributing zakat more than collecting it. He says the aim is that wealth should not keep circulating only among the rich. [3]

He has discussed how the taxation system could be replaced with zakat-based taxation. He says sales tax is widely regarded as highly regressive, and that more than 50, indeed more than 60 percent of collections come through sales tax. He calls it an inefficient system when an 18% tax brings the government 5.5%. He says 70 to 80 percent of Pakistan's income tax comes from large companies, and suggests a single flat tax system to fund government spending. [2][3]

He proposes an ushr system, a zakat on production, applied to all goods, and says ushr is 10 percent on rain-fed land and 5 percent where the farmer irrigates. He says zakat is charged on current market value, not the purchase price. He says determining income exactly is hard, while determining wealth is easy. He says he worked out the calculation for a 2.5 percent zakat together with several economists, and estimates a 2.5 percent wealth zakat would be about 7.5 to 10 percent of GDP. [3]

Khalilullah says about 100 million Pakistanis live below the poverty line, and that the poor have a binding right over the wealth of the rich. He says each of about 12 million poor families could be given 20,000 to 25,000 rupees, and that both zakat types together would give poor families about 60,000 to 70,000 rupees a month. He says that 300 to 400 billion spent on a programme, divided per poor person, might not reach 400 rupees a month. He says Imam Shafi'i held that the government's expense should not exceed 12.5% of total zakat. [2][3]

Views on cryptocurrency and gold

Khalilullah says cryptocurrency is not a currency. He estimates less than half a percent of Pakistan's transactions use bitcoin, and says bitcoin's price closely tracks total global dollar liquidity. He says that when he needs to make a transaction, he will convert bitcoin into a stablecoin. He says he is not saying Mufti Taqi Usmani is wrong, but that he can disagree with him fundamentally or philosophically. [1]

He thinks gold has not been used as a currency since the 15th or 16th century, and says gold can be an investment but cannot serve as a currency. He says he sees gambling happening in every home and on every mobile phone through cryptocurrencies and the stock market. [1][3]

Views on social policy

Khalilullah suggests giving vouchers so that people can study at the school of their choice. He says some schools in Sindh and elsewhere are ghost schools, and that education is a devolved subject. He says families given cash for basic needs do better on education and health. [3]

He says the basic wage is set at about 35,000 rupees, and that thousands work below the basic wage and are exploited. He proposes a job guarantee under which people who cannot find a job are given work. He says labour unions have largely disappeared. [3]

He cites an account from Madinah in which a request to fix prices was refused. He says capital markets drove much of 20th-century growth. [3]

Timeline

2008

Moved to Islamabad.[3]

2024

First wrote about the subject of the book in a three-part article.[1]

Appearances

Frequently asked questions

References

1. By 2032, 93% of Pakistan's budget will vanish into debt . Thought Behind Things , 2026-07-31.
2. Fractional reserve banking is a modern form of riba . Thought Behind Things , 2026-04-15.
3. Islamic banking in Pakistan is mostly a rebrand . Thought Behind Things , 2024-12-24.