National Debt

Public Debt Rose but Became Cheaper – What Does This Mean for Public Finances and Households?

In 2025, Sweden's public debt increased by 93 billion SEK, reaching 1,244 billion SEK, equivalent to 19 percent of GDP. This marks the second consecutive year of a budget deficit, meaning the state continued to borrow to cover expenses exceeding revenues. Despite the growing debt, the total interest costs for the public debt fell to 13 billion SEK, or just 0.2 percent of GDP. The primary reason for this lower cost was the strengthening of the Swedish krona against foreign currencies, which reduced expenses for loans taken out in other currencies.

Why Does This Matter for Public Finances and Taxpayers?

• The state can finance deficits at an unusually low cost. This reduces pressure on future tax hikes or spending cuts, as interest expenses do not consume as large a portion of the budget.
• A stronger krona has acted as a shield against rising interest costs on the currency-exposed portion of the debt. This contributes to greater predictability for the state's economy.
• Strong interest from foreign investors in Swedish government bonds, demonstrated notably during the issuance of 2 billion euros in government bonds in June 2025, signals high creditworthiness for Sweden. This strengthens confidence in the Swedish economy and stabilizes the financial market.
• The state's strategy to reduce currency exposure in its debt protects against future currency fluctuations, thereby lowering the risk of unexpected cost increases for taxpayers.

How Can Households and Taxpayers Interpret and Use This Development?

• An increase in public debt means the state is building up future payment commitments, but as long as interest costs remain low, the direct impact on taxpayers is minimized.
• If the krona weakens in the future, there is a risk that interest costs could rise rapidly, especially if a larger portion of the debt is denominated in foreign currency. The current situation is therefore positive but dependent on currency developments.
• Stable and predictable state borrowing helps keep interest rates calm for households and businesses, as the market views Sweden as a safe borrower.
• If deficits continue and the debt grows over several years, it may eventually require action—either through reduced spending or higher taxes. Therefore, it is important to monitor both the size of the debt and the factors influencing interest costs.

Key Factors to Watch Moving Forward

• The low cost of public debt is largely dependent on the strength of the krona. If the krona weakens, interest costs could rise quickly, particularly for the currency-exposed portion.
• Public debt is still increasing in absolute terms, meaning the total debt burden is growing even though interest costs are low at the moment.
• The state has run a deficit for two consecutive years. If this trend continues, the debt risks growing faster than the economy, which could change the long-term outlook.

Summary Perspective for Households and Decision-Makers

The development in 2025 shows that it is possible for the state to borrow heavily without immediately burdening taxpayers with high interest costs—as long as the currency situation is favorable and market confidence remains strong. However, long-term sustainability depends on the debt not continuing to grow at too rapid a pace and on the krona remaining strong. Households can feel a certain sense of security in today's situation but should be aware that changes in the currency environment or continued large deficits could alter the conditions quickly.