National Debt

National Debt Rises, but Borrowing Costs Fall: What Does This Mean for Public Finances and Households?

Sweden's national debt has increased significantly during 2025 and the beginning of 2026. The state's deficit amounted to approximately 102 billion SEK, meaning the government had to borrow more to cover its expenses. Despite this increased indebtedness, the state has managed to borrow at unexpectedly low interest rates on the capital market.

Large Loans at Low Interest Rates – What Happened?

• National debt has grown, driven by a budget deficit of around 102 billion SEK.
• In June 2025, the National Debt Office (Riksgälden) issued a three-year bond of 2 billion euros (approx. 21.8 billion SEK) with an interest rate of 2.097 percent.
• Demand for the loan was very high – 130 investors participated, with bids totaling over 10 billion euros.
• The interest rate spread against German government bonds was only 21.1 basis points, signaling strong confidence in the Swedish economy.
• This was Sweden's first euro-denominated bond since 2018.

Why Does This Matter?

The state's ability to borrow at low interest rates despite rising debt is crucial for public finances. A low cost of borrowing means less of the state's money needs to be allocated to paying interest on the debt. This provides greater fiscal flexibility – funds can be used for welfare, investments, or to avoid tax increases.

The strong confidence from investors, including international institutions and pension funds, indicates that Sweden is still perceived as a stable and safe country to lend to. This reduces the risk that rapidly rising borrowing costs will burden the state budget, even as the debt increases.

How You as a Taxpayer and Household Can Think About This

• Low borrowing costs for the state reduce the pressure for future tax hikes or welfare cuts, even as debt levels rise.
• Strong demand for Swedish government securities means Sweden can handle periods of deficit without risking a sharp increase in borrowing costs.
• The interest rate environment for government loans indirectly affects interest rates for households and mortgages, though the link is not direct. If the state's borrowing rate remains low, it can contribute to a more stable interest rate environment for households in the long run.

It is important to distinguish between the total national debt and the average interest rate on that debt. New loans are cheap, but older loans may carry higher interest rates. Additionally, loans in foreign currencies, such as the euro, are managed using derivatives to prevent exchange rate fluctuations from affecting the state's economy.

This development should be viewed as a trend: the national debt is increasing, but the direct cost of each newly borrowed krona is low. However, if the interest rate environment were to change rapidly, the picture could shift, so it is worth monitoring the development over time.