National Debt

Public Debt Rose, but Interest Costs Fell – Impact on Public Finances

In 2025, Sweden's public debt increased by 93 billion SEK to a total of 1,244 billion, equivalent to 19 percent of GDP. The state's budget deficit for the year was approximately 102 billion SEK. Despite the increase in debt, the total interest cost decreased to 13 billion SEK, or 0.2 percent of GDP. The primary explanation is the strengthening of the Swedish krona, which reduced the cost of the portion of the debt exposed to foreign currencies.

Why is this development important for public finances and taxpayers?

Normally, a growing public debt implies that the state must allocate more resources to interest payments, which can affect other expenditures. However, the development in 2025 was different: despite increased borrowing, interest costs fell, primarily due to currency fluctuations. A stronger krona meant that the interest cost for foreign loans became lower when recalculated into Swedish kronor. Demand for Swedish government bonds remained strong, particularly from foreign investors, which contributed to keeping borrowing costs down.

For the taxpayer, this means the state budget was not burdened by increased interest costs, even though the debt grew. The state could thus manage the deficit without a sharp rise in interest costs, as long as the currency situation remained favorable and market confidence persisted.

How can this development be interpreted and understood?

• The state's increased borrowing has not led to higher interest costs, providing some breathing room for public finances in the short term.
• The strong krona has acted as a buffer against rising interest costs, but currency fluctuations are difficult to predict and control.
• Stable demand for Swedish government bonds, especially from foreign investors, indicates that the market continues to have confidence in the Swedish economy and the state's ability to manage its debt.
• The debt-to-GDP ratio has increased, which is a trend to monitor in upcoming budgets. A higher debt ratio could, in the long run, affect how the state prioritizes its expenditures and how future borrowing is planned.

It is important to note that the current cost reduction is largely due to the exchange rate. If the krona weakens in the future, interest costs could rise again, even if the debt does not grow as rapidly. Furthermore, the state needs to regularly refinance parts of the debt, meaning loan terms may change as loans mature.

Facts from the 2025 reporting

• Public debt: 1,244 billion SEK (increase of 93 billion)
• Debt-to-GDP ratio: 19 percent of GDP
• Interest cost: 13 billion SEK (0.2 percent of GDP)
• Deficit: approximately 102 billion SEK
• A stronger krona lowered the cost of foreign currency debt
• Significant interest from foreign investors in Swedish government bonds
• Average maturity of public debt: approximately 3.5–6 years

The development in 2025 shows that the state's borrowing costs can be kept down even when debt grows, provided the krona is strong and the market has confidence in the Swedish economy. At the same time, it is important to monitor how the debt ratio develops and to be aware that the exchange rate is an uncertainty factor for the state's future interest costs.