Economics is exceptional discipline among all others because of its connection to every part of people’s daily life. The worships of Islam are also intensively related to the economic activities and can have a significant impact on the economy. Likewise, the onset of the holy month of Ramadan brings a substantial turnaround of financial exercises within the country, affecting the economy in different ways.

Typically, it is the time of the year to reflect over our mode of life and abstain from materialistic pleasures. In this month, all physical assets of the past year are surveyed, and ‘cleansed ‘by the Muslims by giving the required ‘percentage of Zakat’. Even though zakat isn’t essential to pay only in Ramadan, but it has ended up so a common hone by most of the Muslims because of the higher reward of each worship in Ramadan by Allah. Zakat is the mandatory contribution for all those Muslims who are Sahib-un-Nisab (owner of the minimum amount of wealth that makes Zakat payable) to donate at least 2.5%, or one-fortieth, of their wealth each year to benefit others in need. This generosity and charity by rich people empower the poor segment of the community to get adequate reserves to meet their needs. In a few Muslim nations like Pakistan, Algeria Libya, Malaysia, Indonesia, Saudi Arabia, Sudan and Yemen, zakat has been institutionalised, and the State is also responsible for the collection, development, and dissemination of zakat whilst other countries such as Egypt, Iran, Lebanon and the United Arab Emirates, Zakat has instituted a voluntary system. The statistics of zakat shows a significant positive effect on Muslim countries’ economy. In Pakistan, the data of zakat receipt by State Bank of Pakistan shows that the institutionalised Zakat Fund’s total income is about US$ 105 Million on average while the amount of zakat Malaysia received is US$ 689 Million, Sudan US$ 228 Million, Indonesia US$ 231 Million, Yemen US$ 63 million on average. The highest amount of zakat is calculated in Saudi Arabia at US$ 3-4 billion on average which is about 0.62% of Saudi GDP. In brief, the month of Ramadan has substantial financial benefits for the Muslim community, particularly for those who are deprived, it acts as a month the blessing of Allah received in the form of money and food. These are significant entities which ought to be seen as a clear reply to those (primarily within the West) who may criticize the Muslim world for its need of engagement in such generous effort.

One more financial benefit of Ramadan arises if we talk about Ramadan and the performance of stock markets. According to an international study of Ahmad Etebari (University of New Hampshire, US) & Jedrzej Bialkowski (University of Christchurch, New Zealand), who explore the relationship between Ramadan and stock markets and find surprising results that the normal returns in Muslim nations were nearly nine times higher than other months of the lunar calendar. They looked at the markets of fourteen Muslim countries including Pakistan between 1998-2017 and found the average gains of 38.09 per cent during Ramadan compared to 4.32 per cent in the rest of the year.

Another economic perspective of Ramadan is for businesses as the demand for goods and services gets higher in this holy month. In spite of government intercession to control prices, in reality, the prices of goods and services get higher due to higher demand and some other factors, which benefits vendors, retail stores, supermarkets, eateries and cafés etc. When Ramadan coincides with the summer vacations as in Pakistan, this is often an added advantage for cafes and restaurants proprietors at the time of Sahar and Aftar. Ramadan pulls in colossal increments in benefits for businesses compared to the rest of the year. Thus, there is extraordinary potential in progressing the local businesses and driving the country’s economic growth during the month of Ramadan. The commercial viewpoint of Ramadan might be compared to the Christmas season in European countries where eatables advertisements and selling comes to a yearly crest. Not only the food and beverage seller but also the clothing retailers, shopping centre administrators and online stores etc., accrue noteworthy benefits in Ramadan. People spend more not only on food and beverages but also on clothing because after soon the Ramadan closes, Muslims celebrate Eid ul Fitr. They plan for this religious festival some time beforehand. Furthermore, in Pakistan, Ramadan too brings with it special entertainments such as TV programs at Sehar and Aftar which pull in millions of watchers all over the world. So, in this way, the Ramadan period subsequently helps to generate advertising revenues/incomes.

According to economists, almost everything we do has some costs and benefits. A few financial negativizes within the month of Ramadan can be watched in term of a sharp increase in the prices of products. Concurring to the news reports in Pakistan, the fruits and vegetable prices witnessed a 100-200% rise in the holy month of the Ramadan in 2017, and same is the case in 2018. So, sometimes this rise in consumer price can create its own problems, in particular leading to an increase in inflationary pressures. The massive upsurge in prices of food, beverages, transportation and transportation including bus rides, train and plane tickets during Ramadan, the salary bonus can create inflation which may impact the economy negatively.

Some negative economic aspect can be observed by diminished working hours during Ramadan. A two-hour decline in a workday, as happens in Pakistan and Egypt, brings an estimated 7.7% fall within the country’s monthly GDP. Furthermore, workers’ productivity tends to decline during Ramadan. An estimated figure of the decrease in productivity in Muslim majority countries is between 35% and 50%.

Despite all its financial fetch, Ramadan ended up with the opportunity cost of joy, happiness and satisfaction in our religious life.

The writer is working as Associate Research Fellow in Punjab Economic Research Institute.

The commercial viewpoint of Ramadan might be compared to the Christmas season in European countries where eatables advertisements

and selling comes to a yearly crest.