National Debt

National Debt Rises but Costs Fall – Strong Krona Benefits Public Finances

In 2025, Sweden's national debt increased by 93 billion SEK, reaching 1,244 billion SEK by the end of the year. The debt-to-GDP ratio, representing the national debt in relation to GDP, consequently rose from 18 to 19 percent. Despite this increase, the state's cost of servicing the debt fell to 13 billion SEK, equivalent to 0.2 percent of GDP. This development is unusual because a growing debt often implies higher interest costs, but in this case, the cost has decreased.

Stronger Krona Lowered Interest Costs

The primary explanation for the reduced interest cost is the strengthening of the Swedish krona during the year. Since part of the national debt is exposed to foreign currencies, a stronger krona makes it cheaper for the state to pay interest and repay loans denominated in foreign currency. At the same time, Riksgälden (the Swedish National Debt Office) continued to borrow in both Swedish kronor and foreign currencies, including by issuing 2 billion euros in June 2025. Demand for Swedish government bonds has been high, particularly from international investors.

What Does This Mean for Public Finances and Taxpayers?

• The state has been able to finance its deficits at a lower cost than expected, reducing the pressure to quickly raise taxes or implement savings to cover interest costs.
• Strong investor interest and a stable krona provide the state with greater room for maneuver, even if deficits persist for some time.
• The cost of the national debt is now historically low, offering some margin if conditions change in the future.

How Can We Interpret Future Developments?

The increase in national debt indicates that state expenditures exceed revenues. As long as the krona remains strong and investors maintain confidence in Swedish government bonds, the state can continue to borrow at low interest rates. However, there are factors to keep in mind:

• If the krona were to weaken, the cost of the currency-exposed portion of the debt could increase.
• Deficits mean the debt is rising in absolute terms, which could affect the state's costs in the long run if interest rate conditions change.
• A larger share of the debt matures in the coming years compared to some other countries, meaning the state needs continued good access to capital markets.

What Should Households and Taxpayers Take Away?

• Although the state is borrowing more, interest costs have decreased, which could dampen pressure for future tax hikes or spending cuts.
• Stability in the krona and international confidence in Swedish government bonds are key factors for the long-term sustainability of public finances.
• The development is positive for public finances as long as the krona remains strong and interest rates remain favorable, but the situation could change with new economic or political challenges.