What is the ruling on repaying an old loan with the current currency if its purchasing power differs significantly from the value of the currency borrowed at that time?

Contemporary scholars and researchers have given attention to the issue of the depreciation of paper currency due to inflation and its effect on financial obligations and deferred debts. Several research papers have been submitted to the Islamic Fiqh Academy regarding this matter.

Most of these studies agreed on considering the value of the currency at the time of settling deferred rights in cases of severe exploitation (ghabn fāḥish) or currency collapse, which causes significant harm to the creditor, in order to achieve justice.

Dr. Ali Al-Qaradaghi is of the opinion that paper currency is fungible (mithlī), and we do not deviate from this fungibility except when its value collapses or severe exploitation occurs. This is evident in deferred rights, and the value must be taken into consideration in all deferred rights when there is a collapse and severe exploitation between the value of the currency and its purchasing power at the time of the contract and at the time of fulfillment.

The determination of what constitutes severe exploitation depends on what is considered severe exploitation by the custom of merchants.

To assess the currency in cases of collapse or severe exploitation, two standards are relied upon:

1. Essential commodities: By evaluating the quantity of essential commodities that the amount could purchase at the time of the contract, and comparing it to what can be purchased at the time of fulfillment. 2. Gold: By evaluating the quantity of gold that the amount could purchase at the time of the contract, and comparing it to what can be purchased at the time of fulfillment.

The inquirer is advised to reconcile with the borrower's heirs on an amount they agree upon; otherwise, the matter should be referred to a Shariah judge for a ruling.