National Debt

Public debt rose but costs fell – what does this mean for public finances?

During 2025, Sweden's public debt increased, reaching 1,244 billion SEK by the end of the year, equivalent to 19 percent of GDP. The increase – 93 billion SEK in one year – is primarily due to the state running a deficit for the second consecutive year. Despite the growing debt, the total cost of servicing the debt decreased to 13 billion SEK, or 0.2 percent of GDP. The lower cost is mainly explained by the strengthening of the Swedish krona against foreign currencies, which reduced the interest cost for the currency-exposed portion of the debt.

Why does this development matter for public finances and taxpayers?

A growing public debt means the state is borrowing more to cover expenditures that exceed revenues. Typically, increasing debt can lead to higher future interest costs and thus increased pressure on the state budget. However, in 2025, the state has been able to finance its debt at a lower cost, primarily due to currency developments and continued strong demand for Swedish government bonds. This means that the room for other state expenditures has not been affected by increased interest payments, which can reduce the need to adjust taxes or expenditures in the short term.

At the same time, the National Debt Office (Riksgälden) has increased the supply of government bonds and resumed borrowing in euros, indicating continued confidence in Sweden's economy among both Swedish and foreign investors. The latest euro issuance of 2 billion yielded an interest rate of 2.097 percent, which is low in a European perspective and contributes to keeping the state's borrowing costs down.

How can households and taxpayers interpret this development?

• A lower interest cost for the state means that a smaller share of tax revenue goes toward paying interest, which can reduce pressure on future tax hikes or spending cuts.
• A stronger krona means it becomes cheaper for the state to repay currency-exposed debt and can simultaneously strengthen households' purchasing power for foreign travel and imports.
• Stability in public finances and the high interest in Swedish government bonds contribute to a more predictable interest rate environment. Although the link to households' own interest rates is not direct, this can create a more stable economic environment.

What should one be mindful of going forward?

• Public debt is growing in absolute terms, and if deficits continue, the debt-to-GDP ratio could rise further, especially if GDP growth does not increase.
• Although the interest cost is currently low, it is sensitive to changes in exchange rates and interest rate levels – if interest rates rise or the krona weakens, costs could increase again.
• Interest rates are still higher than during recession periods, meaning that even small market changes can affect the state's future interest costs.

The development during 2025 shows that public finances are currently stable despite rising debt levels. At the same time, continued budget deficits and dependence on exchange rates and interest rates mean there is reason to monitor the development closely in the future.