Even the very best interest rates in the U.S. don’t come close to the highest interest rates in the world. Federal fund rates have been consistently low (between 0 and 0.50 percent) since December 2008, and interest rates for savings accounts and checking accounts have been low as well, with current national rates at 0.06% APY for savings and 0.04% APY for interest checking.
Despite these all-time-low interest rates, there is still some money to be made out there; you just won’t find it anywhere near the U.S. Here are the countries with the highest interest rates in the world, and information on how inflation plays a role in these rates.
Interest Rates Today: The Highest Interest Rates in the World
While a savings or money market account isn’t considered “safe money” in some of these countries — since money is only as safe as the entity backing their promise — it is intriguing to see what your money could earn in other parts of the world.
Here are some countries that currently offer the highest interest rates in the world on one-year time deposit accounts, or what we refer to as CDs. Inflation rates and the U.S. are included for comparison.
|Top 10 Countries With the Highest Interest Rates|
|Ranking||Country||Interest Rate (% APY)||Inflation Rate (%)|
Like our CDs, money must remain in these various accounts for a predetermined amount of time before the depositor is eligible to withdraw the principal deposit and earned returns. Common terms were three, six, nine, 12 and 18 months.
How Inflation Factors Into High Interest Rates
“The safer things are, the lower interest rates are likely to be, and vice versa,” chartered financial analyst Chris Georgandellis of Exchange Capital Management said. In unstable environments, the value of the currency might be unpredictable and might not be worth tomorrow what it’s worth today. Because of that, people tend to spend money as soon as they get it, which is one of the contributing factors to inflation.
To combat people’s desire to immediately spend money, the government or money authority might raise interest rates. Raising interest rates sends the message that it’s better to hold on to the money, as you could get it back with a lot of interest in the future.
Georgandellis gave the following example: “Imagine a situation where inflation is running at 20 percent on an annualized basis. An individual can reasonably assume that a unit of cash today will essentially buy 20 percent less in a year. In such a case, it makes sense to spend all of their cash today. However, if the government steps in and says, ‘If you put your money in the bank, we’ll pay you 25 percent in a year,’ the calculus changes.
“All else being equal, a rational investor will recognize that if they deposit their cash today, they’ll come out with 5 percent more cash in a year, even after inflation. The act of saving money has a further knock-on effect: It takes cash out of circulation. Less cash in the system chasing the same amount of goods essentially helps to cut down on the original problem of inflation.”
Top 10 Highest Interest Rates After Inflation by Country
In the next table, we take a look at the ten countries we listed earlier and their ranking by interest rates — after factoring in inflation rates. As you can see, the rankings are quite different with the inflation rates accounted for.
|Top 10 Highest Interest Rates After Inflation by Country|
|Ranking||Country||Interest Rate (% APY)||Inflation Rate (%)||Difference|
|4||Azerbaijan||12.20 to 11.50||2.40||9.8 to 9.4|
To understand why these interest rates are so high, the following table offers some information, including how inflation plays a role.
|Country||Reason for High Interest Rate and How Inflation Factors In|
|Uzbekistan||Inflation in Uganda is driven in part by devaluation of local currency; interest rates are high to combat this currency devaluation.|
|Georgia||Inflation expectations were rising as a result of currency depreciation; interest rates were raised to prevent any further depreciation.|
|Ukraine||Rates have remained high as a defensive measure against the increase of short-term inflation risks.|
|Azerbaijan||Interest rates are set high in an effort to curb inflation and to restore confidence in the national currency after the collapse in crude oil prices.|
|Argentina||Depreciation of Argentine currency is fueling inflation. Rates are set high to draw investors to peso assets, curb a slide in international reserves and to combat both the inflation and further currency depreciation.|
|Mongolia||Reason for high interest rate and how inflation factors in: Rates are set high to encourage foreign investment, keep inflation low and stable, and because local currency has been devalued.|
|Belarus||To fend off further devaluing of currency, rates have been raised with the goal of slowing down inflation and boosting economic stability.|
|Armenia||Inflationary pressures are perceived to be high so tightened monetary measures, including high interest rates, continue to persist.|
|Uganda||Interest rates have been set high in an effort to reinstate confidence in the financial markets and calm both anxiety among investors and devaluation of local currency, which has caused inflation to rise.|
|Iran||Rates have been set high in an effort to boost the economy, so that interest on savings are higher than inflation and loans are less expensive for industry.|
Top 10 Highest Real Interest Rates in the World
Real interest rate is the lending interest rate adjusted for inflation as measured by the GDP deflator. This table shows the 10 countries with the highest real interest rates, with the U.S. included for comparison.
|Top 10 Highest Real Interest Rates by Country|
|Ranking||Country||Real Interest Rate (%)|
|9||Congo, Dem. Rep.||17.20|
For reference, the U.S. ranks 234 on this list, with a real interest rate of 1.80% APY. It’s important to note that the terms and conditions attached to lending rates differ by country, so it’s difficult to make an apples-to-apples comparison.
Here’s some information as to why these countries’ interest rates are so high. You can also see how the high and/or unstable inflation rates in these countries plays a role; in general, high or rising inflation rates spur high interest rates.
|Country||Reason for High Interest Rate and How Inflation Factors In|
|Madagascar||Inflation has been on the rise because of cuts on fuel subsidies, so interest rates have been set high to combat the rising inflation.|
|Libya||Scarcity and low accessibility of supplies are causing inflation, so interest rates are set high to lower it.|
|Brazil||High inflation rates are associated with rising unemployment levels in Brazil; rates are set high to reign in those inflation rates.|
|Sierra Leone||Inflation is high because of food shortages and because of the depreciation of local currency; interest rates have been set high to lower inflation.|
|Malawi||Inflation in the country is mainly driven by the availability of food. Current scarcity of food and consistently high inflation contributed to higher interest rates being put in place in an effort to curb an increase in prices and counter weakness in the local currency.|
|Uganda||Inflation has risen largely in part to the devaluation of local currency; in turn, interest rates have been set high as part of tightening monetary policy to combat the inflation rise.|
|Tajikistan||Inflation continues its slow rise, partly because of the exchange rate which is linked with the likely depreciation of the Russian rouble; to counter this inflation rate, interest rates are set high.|
|Azerbaijan||Interest rates are set high in order to curb inflation and restore confidence in the national currency after the collapse in crude oil prices.|
|Democratic Republic of Congo||Congo has been able to drastically lower their inflation rate as a result of their now-cautious macroeconomic policy and increased export revenue. Interest rates remain high as a measure to control inflation.|
|Paraguay||The central bank is focused on taking actions toward a less expansive monetary policy to ensure that inflation lowers; this effort includes setting interest rates high.|
How the U.S. Banking System Compares
These countries have central banks that are responsible for controlling the currency much like the U.S. does. They also have both well-established banks and banks that are smaller and newer, much like our credit unions and small, local banks.
The only real difference between the U.S. banking systems and those in other countries is some of the terms we use. While the terms “savings account” and “money market account” are found throughout these banking systems, our common understanding of a certificate of deposit (CD) wasn’t found in all of these countries with the best interest rates.
In places like Argentina, Ukraine and Uganda, what we understand as a “CD” was similar to their Term Deposit, Personal Saving Certificate and Fixed-Term Deposit accounts. Like our CDs, money must remain in these various accounts for a predetermined amount of time before the depositor is eligible to withdraw the principal deposit and earned returns. Common terms were three, six, nine, 12 and 18 months.
The low interest rates in the U.S. are an indicator of the stability here; the highest current interest rates in the world come from highly unstable countries. As shown in the first table in this article, the U.S. ranks 61 for countries with the highest interest rates — our interest rates are a low 1.3% APY with inflation rates at 1.5 percent, indicating high stability, especially when compared to other countries in the table.
In the U.S., current mortgage rates, savings account rates, CD rates, auto loan rates, credit card interest rates and home equity line of credit rates are anchored by the most basic of interest rates, the federal funds rate. All interest rates in the U.S. — prime interest rate, mortgage interest rates, savings account interest rates, etc. — take their cue from the current federal funds rate; if the federal funds rate rises, all other public and private rates will generally rise, too.
Supply and demand do still play a part, though. Because interest rates are just another way of describing the cost of money, if there’s a lot of demand for money, the price rises accordingly. Conversely, if demand for money is low, the price will fall.
“When it finds it necessary, the government will get involved to help move things along,” Georgandellis said. “For example, if the government wants people to buy houses, it will lower the cost of borrowing money to buy a house. If the Federal Reserve wants to stop people from speculating on homes, it will make the cost of money more expensive by raising interest rates — which is what happened in the years immediately preceding the 2008 financial crisis.”
Keep Reading: 50 Cheapest Countries to Live or Retire
Proceed at Your Own Risk and With Extreme Caution
Before you jet off to one of these countries and try to take advantage of their high interest rates, know that the insurance on deposits is, unfortunately, not what we have here in the U.S.
Deposits in the United States are protected by either the FDIC or the NCUA. While it’s easy to take this tremendous government benefit for granted, it’s not something that’s common in other countries.
“These countries generally share something in common,” Georgandellis said. “That is, all of them are unstable, unpredictable, potentially unsafe countries which variously present to individuals some of the most inhospitable investing environments on the planet. ”
As with all investments and bank accounts, especially in developing countries, it’s always important to weigh the amount of risk you take on versus the return that you’re going to get. While it would be great to earn 11% APY on a CD, it’s comforting to know that your money in the U.S. is fully protected in the event that your financial institution crumbles.
Jason Larkins contributed to the reporting for this article.