Effects of the elimination of riba on the distribution of income By:ali ahmad rushdi,presented at the second international conference on development,finance

and distribution in islamic perspective,held at islamabad,pakistan,an also to appear in a bookdistribution in an islamic framework(forthcoming). In this paper,an attemp is made to demonstrate that optimum resource mobilisation and resource allocation can better be achieved by eliminating riba from society. After discussing the problem of money supply and credit creationin an interest-free economy it has been concluded that the present system of money supply composed of base money and credit money may continue in an interest-free economy but the benefit accuring to the commercial banks out of their credit ceation should be devoted to promotion of social welfare. The islamic values in the fields of saving,investment,employment,transactions in the goods and moneymarkets have been delineated and integrated with the neo-classical and neo-keynesian analyses of general equilibirum.it has been shown that the elimination of riba would beinstrumental in rapid expansion of employment avenues and in removing the dampening effects of wages,price and speculation on the rate of investment. The problem of capital formulation in the absence of a positive rate of interest and monopolistic profit making has been discussed. Finally after discussing the problem of share of a factor of production in the produced goods the paper concludes that in an islamic economy market distrotion will be insignificant and in the ultimate analysis may be paid according to their marginal productivity.

PUBLIC BUDGETING,CAPITAL ACCUMULATION AND ECONOMIC GROWTH IN AN ISLAMIC FRAMEWORK This paper attempts to outline an islamic strategy of economic development to be implemented by the muslim countries in the special context of their economic and social conditions. The chief thrust of the study is towards the integration of redistribution with economic development in the light of islamic teachings and value orientations.it seeks to argue that this integrationis possible by pursuing a strategy of development wich deliberately aims at improving the economic conditions of the muslim masses.it involves a carefully devised scheme of investment in human capital,consumption standards,and aid to the earning capacity of the poor and small artisans,framers,and businessmen combined with effective means to redistribute existing wealth and newly generated assets.

The paper is divided into three section s.the first section is devoted to a brief analysis of the consepts of capital and economic growth as explained in modern economic literature and attempts to point out the inadequacy of these concepts as a guide to islamic policy formulations. The second section deals with setting out the socio-economic priorities of current muslim societies for the attainment of socio economic-progress.an attempt has been made to delineate an islamic strategy of policy intervention in the current economic situation of muslim countries. The last section discusses the impact of the above stated strategy on the pattern of government development expenditure.an analysis of the ways in which public expenditures will be attuned to the elimination of poverty and redistributive growth has been made.