This is because such linkage involves considerable uncertainty (gharar) and gross indeterminacy: neither party truly knows what he must pay or what he is entitled to receive, thereby breaching the requirement of full knowledge that underpins the validity of contracts. Moreover, when the items used for indexation tend to rise in value, the result is a disparity between the amount owed and the amount demanded for payment—an inequality written into the contract itself—and that constitutes ribā (usury).

Fourth: Indexing wages and rents

(a) The Academy reaffirms the implementation of Resolution no. 75, paragraph One, which permits the indexation of wages in line with changes in the general price level.

(b) In long-term leases of tangible assets, it is permissible to fix the rent for the first period and, within the lease contract, to link the rent for subsequent periods to a specified index, provided that the rent becomes known in exact figures at the start of each period.

Recommendations

The Academy recommends the following:

1 Because the principal driver of inflation is the expansion of the money supply issued by the competent monetary authorities for various well-known reasons, we call upon those authorities to work earnestly to remove this cause—which gravely harms society—and to avoid financing through inflation, whether to cover budget deficits or to fund development projects. At the same time, we advise Muslim peoples to adhere fully to Islamic values in consumption so that our societies may avoid the patterns of extravagance, luxury, and waste that generate inflation.

2 To increase economic cooperation among Muslim countries—especially in the field of foreign trade—by substituting their own manufactured goods for imports from industrialized nations, and by strengthening their bargaining and competitive position vis-à-vis