UNCTAD has published a report titled World of Debt 2025, calling for reforms. Here is highlight of what the report says:
+Global public debt in 2024 surpasses USD 102 Trillion.
+Public debt grows twice as fast in developing than in developed countries.
+The number of countries with heavy debt burdens remains high.
+Countries with significant external debt service burden nearly doubled since 2010.
+Developing countries pay a record US$921 billion in interest.
+In 61 countries, interest payments exceeded 10% of government revenues.
+Interest payments are growing faster than other public expenditures.
+Africa spends more on interest than on health or education.
+3.4 billion people live in countries that spend more on interest than on health or education.
What is the real problem?
In 2000, former Nigerian President Olusegun Obasanjo famously described compound interest as "the worst thing in the world," particularly in the context of Nigeria's external debt burden. He highlighted that despite substantial payments made on loans, the debt continued to escalate due to the compounding effect of interest. He said:
"All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors’ interest rates."
"If you ask me what is the worst thing in the world, I will say it is compound interest".
The PR campaign behind interest.
Mr. Adil Hussein in his article "Why Compound Interest is the Worst Thing in the World" associated the modern mindset in favour of interest to the infamous (and most likely fake) quote by Albert Einstein that best encapsulates the PR campaign to rebrand interest: ‘Interest is the eight wonder of the world!’ We also read in books of personal finance and financial literacy on the magic of compound interest.
Such positive highlights on interest keeps making it gain predominance, while covering up the wider side effects of it. I am glad to see emerging trends to counter such PR stunts as what we see in "World of Debt report" shows magnificient harm to people, propelling income inequalities. Still more voices at global stage are needed.
While the report call upon us to move from conversation to action, the problem of interest still ignored by many in public and private sector as if we have no alternatives.
So, what’s the alternative?
1. Loans or debts without interest.
2. Trade with profits not interest.
Above alternative among others have been extensive subjects in IslamicFinance and a gift to the world when conversations, theory put into actions.
Finally to quote Adil, "Wealth shouldn’t be amassed through the suffering of others but rather through fair, ethical, and equitable trade." Time to act is now.