National Debt

National Debt Surpassed 1.2 Trillion – But Interest Costs Dropped Significantly

At the end of 2025, Sweden's national debt amounted to 1,244 billion SEK, an increase of 93 billion compared to the previous year. Consequently, the debt-to-GDP ratio rose to 19 percent. This increase is primarily explained by the state running a budget deficit for the second consecutive year, leading to increased borrowing through government bonds and short-term instruments.

Despite the growing debt amount, the state's total interest cost decreased to 13 billion SEK, equivalent to 0.2 percent of GDP. The main reason is that the Swedish krona strengthened during the year, which lowered the cost of the currency-exposed portion of the debt. The National Debt Office (Riksgälden) also resumed borrowing in euros, issuing 2 billion euros at an interest rate of 2.097 percent, which was met with strong demand from investors.

Why does this matter for public finances?

An increase in national debt means the state will need to allocate more resources to interest payments in the future. However, when interest costs decrease despite a larger debt, it frees up room in the budget for other expenditures. This can reduce the need to adjust taxes or public services to finance the deficit, at least in the short term.

The strong krona has been crucial in keeping interest costs down. If the krona weakens again, this effect may diminish, and the cost of foreign currency loans could rise. Therefore, it is important to distinguish between the size of the debt and what it actually costs the state each year.

What does this mean for taxpayers and savers?

• The state's low interest cost in 2025 means that a smaller share of tax revenue went to interest payments, even though the debt increased. This could dampen the pressure for new tax hikes to cover deficits.
• The fact that Sweden can borrow at relatively low interest rates in both kronor and euros indicates continued confidence from the capital markets, contributing to stability in public finances.
• For those saving in Swedish government bonds, the strong international interest can be seen as a signal that these securities are still regarded as safe assets.
• However, a growing national debt means that a certain portion of tax funds will continue to go toward interest payments rather than welfare and investments. As long as interest rates remain low, this effect is limited, but the situation could change with currency fluctuations or rising interest rates.

What to watch going forward

• The state's deficit continues to grow, which is the underlying reason for the increasing debt. If deficits persist for several consecutive years, it could eventually affect the sustainability of public finances, even if interest rates are low.
• The reduced interest cost in 2025 is partly due to exchange rate movements that could reverse if the krona weakens in the future.
• It is important to monitor both the development of the national debt's size and its cost, as they are influenced by different factors and have different implications for the state's economy.