National Debt

Public Debt Grew but Interest Costs Fell – What Does This Mean for Public Finances and Households?

In 2025, Sweden's public debt increased by 93 billion SEK to a total of 1,244 billion SEK, equivalent to 19 percent of GDP. This was the result of the state running a deficit for the second consecutive year. The increased debt means the government is borrowing more money to cover expenses that exceed revenues.

At the same time, however, the state's interest costs fell to 13 billion SEK, or 0.2 percent of GDP. This unusually low cost is primarily due to the strengthening of the Swedish krona during the year, which reduced the cost of the currency-exposed portion of the debt. Furthermore, the National Debt Office (Riksgälden) has issued new government bonds, including a loan of 2 billion euros in June 2025 at a low interest rate. Demand for Swedish government securities has been strong, particularly among foreign investors.

Why does this development matter?

• For public finances, the increased debt means the state will face a larger repayment burden in the future, even though current interest costs are low.
• The low interest cost, thanks to a strong krona, temporarily provides more room in the state budget, for example for new investments or avoiding tax hikes.
• A growing debt makes Sweden more vulnerable to future changes in interest rates or exchange rates. If the krona weakens or interest rates rise, costs could increase rapidly.

How should households and taxpayers think about this?

• Even though the interest rate on public debt is low now, the increased debt means the state may need to raise taxes or cut spending in the future if financing costs rise.
• Strong demand for Swedish government securities and low borrowing rates signal continued international confidence in Sweden's economy, which could contribute to lower interest rates for household mortgages in the long run.
• It is important to monitor the development of the krona's value and the interest rate environment, as these factors can quickly change the state's cost structure, thereby affecting both public finances and household economics.

What is worth keeping an eye on going forward?

• If deficits continue and debt grows, public finances risk becoming more vulnerable to external shocks, such as currency depreciation or rising interest rates.
• The low cost in 2025 is largely an effect of currency movements, not necessarily a lasting trend.
• The state's increased reliance on foreign investors to finance the debt could make Sweden more sensitive to global market movements.

In summary, the development in 2025 presents a paradoxical picture: the state is borrowing more, but it costs less right now. However, it is important to be aware that the underlying debt is growing, which could affect future tax levies and the possibility of public investments. For households, this means that both tax and interest rate levels could be affected over time, depending on how the economy and the currency market develop.