National Debt

National Debt Rises – But Interest Costs Fall Thanks to a Stronger Krona

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, indicating that the state's debt is growing in relation to the economy. At the same time, the cost of paying interest on the national debt decreased to 13 billion SEK, or 0.2 percent of GDP. The primary reason for the lower interest cost was the strengthening of the Swedish krona during the year, which reduced expenses for the currency-exposed portion of the debt.

Why does this matter for public finances and taxpayers?

The growth in national debt means the state is borrowing more to finance its expenditures, particularly as deficits continue for a second consecutive year. Normally, a larger debt could imply higher interest costs and increased pressure on the state budget in the long run. However, the strengthening of the krona has instead made it cheaper to pay interest on the debt, thereby reducing pressure on the state's finances.

The lower interest cost means the state can manage its deficits at a lower cost than expected. The low debt-to-GDP ratio of 19 percent remains low by international standards, giving Sweden some margin to handle future economic challenges.

How can these changes be interpreted and what should one watch out for?

• The state can borrow more at a lower cost, which dampens the direct effects of growing deficits.
• A stronger krona acts as a protective factor against rising interest costs, but the trend could reverse quickly if the krona weakens.
• Demand for Swedish government bonds remains strong, even from foreign investors, indicating continued confidence in the Swedish economy and the state's borrowing.
• The maturity of the national debt remains stable within the middle of the National Debt Office's target range, meaning the risk that the state must quickly refinance large parts of the debt is limited, though not non-existent.

Risks and uncertainties ahead

• The state's deficit continues to grow, which will drive up the debt in the long term even if interest costs are currently low.
• A future weakening of the krona could rapidly increase interest costs, particularly for the currency-exposed portion of the debt.
• Market interest rates may change, affecting what the state will have to pay for future borrowing.

Thus, the increase in national debt is not an acute problem as long as the cost of the debt remains low, but the development should be monitored closely. The current situation shows that exchange rates and investor confidence are crucial in determining how expensive or cheap it is for the state to borrow, and consequently, how public finances develop over time.