National Debt

National Debt Grew but Costs Fell – What Does This Mean for Sweden's Economy?

In 2025, Sweden's national debt increased by 93 billion SEK, reaching a total of 1,244 billion SEK by the end of the year. Consequently, the debt-to-GDP ratio rose to 19 percent. At the same time, the total interest cost of the national debt decreased to 13 billion SEK, equivalent to 0.2 percent of GDP – an unusually low level in historical terms.

What Explains the Lower Interest Cost?

The main reason for the reduced interest costs is the strengthening of the Swedish krona during the year. Since part of the national debt is borrowed in foreign currencies, the interest cost is affected by exchange rates. A stronger krona makes it cheaper for the state to pay interest on these loans. To manage currency risks, Riksgälden (the Swedish National Debt Office) uses derivatives, meaning the state is not directly exposed to the euro exchange rate for the new euro-denominated bonds.

In 2025, Riksgälden issued, among other things, euro-denominated bonds at an interest rate of 2.097 percent. Demand for Swedish government securities was strong, with broad participation from foreign investors, contributing to favorable borrowing conditions.

What Does This Development Mean for Public Finances and Households?

• The state has been able to finance its deficit without an increase in interest costs, providing some short-term breathing room for the state budget.
• The stronger krona has dampened pressure on interest costs, reducing the need to quickly adjust other expenditures to cover these costs.
• High demand for Swedish government securities indicates continued confidence in the Swedish economy, which can contribute to stable borrowing conditions.
• However, it is important to note that the debt-to-GDP ratio is actually increasing. This means the state still has a structural deficit that needs to be managed to avoid reducing its economic room for maneuver in the long term.

Looking Ahead

The current situation – with growing debt but lower interest costs – depends largely on the krona remaining strong and investors' confidence in Sweden persisting. If the exchange rate were to weaken or if global interest rate conditions change, interest costs could rise again. This means today's low costs are not guaranteed in the long term.

For households and taxpayers, this development means that public finances are stable for the time being, but there is reason to monitor the development of the national debt going forward. If the debt-to-GDP ratio continues to rise, it could affect the state's ability to handle future challenges or investments.