The appeal, filed by the Nawaz Sharif Government, had raised several fundamental questions about introduction of an interest-free economy mentioning Pakistan's obligation towards other countries and international financial institutions which had given loans worth billions of dollars to the country on interest.

The withdrawal of the appeal was confirmed by Law Minister Khalid Anwar on Saturday.

Filed last July, the appeal had also argued that the change in system would question the validity of the banking system in the country and sought a time frame of at least two years to do the needful in this regard.

The issue of interest-free economy has been hounding Sharif since his first term as Prime Minister as the FSC order waspassed in November, 1991 the time since when the government is trying to avoid the sensitive issue through different means.

But during the present term, which began in February 1997, the Pakistani government has been facing continuous pressure, to introduce an Islamic system in the country, from powerful religious groups like the Jamaat-e-Islami.

Even newly-elected Pakistani President Muhammad Rafiq Tarar, known for his fundamentalist background, has been talking about the introduction of the Islamic system at public fora quite regularly.