High-interest rates have negative consequences on citizens and the country as a whole.
by Annahar Staff -Source: Annahar
High-interest rates lead to an increase in public debt servicing and debt costs, not only for the state but also for individuals and institutions. They curb investments, increase the unemployment rate and limit growth. While countries reduce interest rates to attract investors, Lebanon does the opposite while ignoring the disadvantages.
High-interest rates have negative consequences on citizens and the country as a whole. In Lebanon, interest rates are always on the increase and have become a heavy burden that citizens can no longer bear. They are an indicator of the state’s failure to control the economy. High-interest rates also lead to an increase in public debt servicing as a result of the state’s need for money and its reliance on indebtedness. They also apply to all parties in the private and public sectors, according to economist Elie Yachoui.
Speaking to Annahar, Yachoui argued that “raising interest rates as a result of negative financial ratings is unnecessary.”
“The 25-year high-interest rates is what caused Lebanon to slide into these negative financial ratings. They have disrupted investment, consumption and economic growth, and led to public debt accumulation. Job opportunities decreased and Lebanese youth were driven abroad.”
According to economist Kamal Hamdan, “the share of loans taken by families and institutions from banks is around 100 percent of GDP, which amounts to USD 55 billion.” Consequently, high-interest rates have an impact on all categories and economic sectors, namely the productive ones while having an adverse effect on Lebanon’s economic future. He explained that a study conducted in some 60 countries showed that the indicators of poverty – i.e. inequality – tend to rise with high-interest rates. The greatest danger, according to Hamdan, is the state’s lack of awareness on the risks and negative consequences of high-interest rates.