National Debt

National Debt Increased but Interest Costs Fell – What Does This Mean for Public Finances?

In 2025, Sweden's national debt grew by 93 billion SEK to a total of 1,244 billion SEK, equivalent to 19 percent of GDP. This increase is due to the state running a budget deficit for the second year in a row. At the same time, the state's cost of financing the debt fell to 13 billion SEK, or 0.2 percent of GDP. The main reason for the lower cost was the strengthening of the Swedish krona, which reduced expenses for the portion of the debt exposed to foreign currencies.

Higher Debt, but Lower Interest Costs

It is important to distinguish between the size of the national debt, the cost of the debt, and the state's budget deficit:

• Size of the national debt indicates the total amount the state owes.
• Cost of the national debt refers to the annual interest expenses the state pays on its debt.
• Budget deficit means that the state's expenditures exceed its revenues during a year, forcing the state to borrow more.

Despite the growing debt, the state has been able to borrow at favorably low interest rates. For example, Riksgälden issued euro-denominated bonds in 2025 at an interest rate of 2.097 percent, which is low even from a European perspective. The strong demand for Swedish government securities, particularly from foreign investors, signals continued high confidence in the Swedish economy.

Why Does This Development Matter?

The state's ability to borrow more at a lower cost has several implications:

• It reduces pressure on the state budget, as less money needs to be allocated to interest payments.
• The state gains greater room to maneuver to handle economic challenges, as interest costs do not rise at the same rate as the debt.
• Strong investor confidence contributes to stability in the financial markets and can dampen fluctuations in the value of the krona.

However, it is important to note that the lower interest cost in 2025 was largely due to currency fluctuations. If the krona weakens or interest rate conditions change in the market, the state's interest costs could rise quickly again, especially if deficits continue and the debt keeps growing.

How Should Households and Taxpayers Think About This?

• The low interest cost means the state does not need to raise taxes or cut spending as quickly to manage increased deficits, as long as interest rate and currency conditions remain favorable.
• For those saving or investing, the state's low borrowing rate can serve as a benchmark for what is considered a safe and low-risk level in the economy.
• It is wise to stay alert to significant changes in interest rates or the value of the krona, as these can quickly affect the state's future costs and thus the fiscal space in the state budget.

Keeping an Eye on the Future

• The national debt remains low internationally, but it is growing and could lead to higher interest costs if conditions change.
• The current situation relies largely on a strong krona and low interest rates – if this changes, the state's interest costs could rise rapidly.
• Deficits in the state budget are the primary driver behind the debt increase, making it important to monitor the state's revenues and expenditures going forward.