A high-interest climate functions similarly to a powerful enchantment, effectively sucking up financial resources.
MP Hanna Katrín Friðriksson Urges for Sustainable Prosperity and Responsible Management
Hanna Katrín Friðriksson, a member of Parliament for The Liberal Reform Party, believe that if interest charges weren't the third largest item of expenditure in Iceland, as they are today, the country could achieve sustainable prosperity along with prudent economic management, instead of continually borrowing to maintain the current standard of living.
Debt-related Interest Costs Escalation
Friðriksson calls attention to the rapid rise in the state's interest fund costs, which she attributes to the government's deficit operations and debt collection. She warns citizens of the harsh reality of Iceland's high-interest environment that sucks money away from better uses, such as the welfare system.
Higher Interest Rates Compared to Peers
As a percentage of GDP, Friðriksson points out that Iceland's interest rates are considerably higher than neighboring countries and other internationally comparative nations. Furthermore, the interest rates are even higher than in countries with debt burdens far greater than Iceland.
Swelling Interest Expenses
In the past few years, interest expenses in Iceland have increased by 50-60 billion ISK, with a projected 95 billion ISK next year. In context, this amount is nearly equivalent to the entire college and university budget and slightly exceeds the combined contributions to transportation and healthcare. The potential applications of these funds are apparent, says Friðriksson, drawing attention to the interest rate differential.
She emphasizes that the long-term interest rates in the EURO area are approximately half of the long-term local interest rates in Iceland.
"It would be preferable if the interest charges in Iceland were only half their current rate," Friðriksson contends. "Saving 40-50 billion ISK this way is roughly equal to our annual Health Insurance contributions and could secure contracts with self-employed psychologists, speech therapists, specialists, and others."
Enrichment Insights:
- Iceland’s higher interest charges mainly stem from a tight monetary policy, persistent inflationary pressures, and economic risk factors.
- To combat higher interest rates, gradual policy easing may be employed, potentially reducing these costs over time.
- Although higher interest rates can hinder investment and consumer spending, they also contribute to macroeconomic stability by controlling inflation and shielding the economy from external shocks.
- MP Hanna Katrín Friðriksson, the Liberal Reform Party member, reminded people about the escalating debt-related interest costs, which she blames on the government's deficit operations and debt collection, and regretted the money being diverted from essential uses like the welfare system due to Iceland's high-interest environment.
- Friðriksson shares her concerns about the high-percentage of Iceland's interest rates compared to neighboring countries and other internationally comparative nations, noting that even countries with larger debt burdens have lower interest rates.
- Friðriksson points out that in the past few years, swelling interest expenses in Iceland have amounted to around 50-60 billion ISK, with a projection of 95 billion ISK next year—nearly equivalent to the entire college and university budget and slightly more than the combined contributions to transportation and healthcare.
- Suggesting ways to combat the high interest rates, Friðriksson advocates for gradual policy easing to potentially reduce these costs over time, which could result in savings equal to annual health insurance contributions, providing opportunities to secure contracts with self-employed psychologists, speech therapists, specialists, and others.
