National Debt

Public Debt is Growing but Costs Less: What Does It Mean?

Sweden's public debt increased by 93 billion SEK during 2025, reaching 1,244 billion SEK by the end of the year. At the same time, the debt-to-GDP ratio rose from 18 to 19 percent. This increase is due to the state running a deficit for the second consecutive year, necessitating additional borrowing to cover expenditures.

Debt Management Costs Decrease Despite Increased Borrowing

While the debt is growing, the cost of managing the public debt has decreased to 13 billion SEK, equivalent to 0.2 percent of GDP. The primary explanation is that the Swedish krona strengthened during the year, reducing costs for the portion of the debt exposed to foreign currencies. This means the interest cost for the state has become lower than in previous years, despite the increase in debt.

Strong Demand for Swedish Government Bonds

The National Debt Office (Riksgälden) has increased the supply of government bonds and issued, among other things, 2 billion euros in June 2025. Demand was strong, particularly among foreign investors, allowing Sweden to borrow at relatively low interest rates. The market views Swedish government securities as a safe investment, contributing to keeping interest costs down.

What Does This Development Mean for Public Finances and Households?

• The state's interest costs are a significant part of the national budget. When these are low, despite increased debt, the pressure on state expenditures decreases.
• A strong krona benefits the state's economy by making foreign loans cheaper. Conversely, if the krona weakens, interest costs could rise.
• High demand for Swedish government securities and low state interest costs signal stability, which can contribute to a favorable interest rate environment for other market actors as well.
• However, the continued growth of public debt remains a risk factor in the long term, especially if interest rates rise or the exchange rate situation changes. In such cases, interest costs could increase and affect the state's budgetary room.

Things to Consider as a Taxpayer or Household

• Continued low state interest costs reduce the risk of rapid changes in the national budget in the short term, but the development of the krona and the interest rate environment are important factors to monitor.
• A stable Swedish economy and strong demand for government securities are positive for the bond market, but budget deficits mean the state continues to build up debt. If the interest rate environment changes, it could have consequences for the state's economy.
• Low interest rates are not guaranteed in the long term, especially if global financial markets or the Swedish krona change.

Key Uncertainties to Monitor

• The state's borrowing costs are currently low thanks to the strong krona, but there are no guarantees that the krona will remain strong.
• Public debt has a larger proportion maturing in the short term compared to many eurozone countries, making Sweden more sensitive to rapid interest rate changes.
• If deficits continue and the debt increases further, it could eventually affect Sweden's creditworthiness and interest costs.