National Debt

National Debt Rises While Interest Costs Fall – What Does This Mean for Public Finances?

In 2025, Sweden's national debt increased by 93 billion SEK to a total of 1,244 billion SEK, equivalent to 19 percent of GDP. This marks the second consecutive year that the state has run a deficit and needed to borrow more to cover expenditures. Despite this growing borrowing need, the total interest cost on the debt decreased to 13 billion SEK, or 0.2 percent of GDP. A key explanation is that the Swedish krona strengthened during the year, which reduced the cost of the portion of the debt exposed to foreign currencies.

Why Does This Development Matter for Public Finances and Taxpayers?

A growing national debt means the state needs to borrow more, but when interest rates on these loans are low, the annual cost of paying interest becomes less burdensome for the state's budget. This implies that the pressure to raise taxes or cut spending to cover interest costs decreases, at least in the short term. The fact that costs are falling despite increased debt allows more of the state's resources to be allocated to expenditures other than interest payments.

Another factor is that demand for Swedish government bonds, both in SEK and in euros, has been strong throughout the year. Foreign investors have shown interest in Swedish government securities, which can help keep interest rates low and facilitate the state's ability to borrow on favorable terms.

How Can This Change Be Interpreted and What Could Influence Future Developments?

• The growth in national debt shows that the state is using loans to cover deficits. As long as interest costs are kept low – through low interest rates and a strong krona – this is less concerning for public finances in the short term.
• However, the low interest cost is partly dependent on factors that the state cannot fully control, such as the exchange rate. If the krona weakens or the global interest rate environment changes, interest costs could rise in the future.
• The state has continued to finance the deficit by issuing more government bonds and euro-denominated bonds. This has worked well thanks to continued investor confidence, but it also means the debt matures continuously and must be refinanced.
• For households and taxpayers, the current development means that the direct effect on taxes or the state budget is limited, as long as interest rates remain low. However, if deficits continue and the interest rate environment changes, the cost situation could become more challenging for public finances.

Things to Consider for Those Following the National Debt

• The national debt is now 1,244 billion SEK, an increase of 93 billion during the year.
• The debt-to-GDP ratio is 19 percent, which is still low internationally but has increased for two consecutive years.
• The cost of paying interest on the debt is low: 13 billion SEK or 0.2 percent of GDP.
• The state has been able to borrow at low interest rates in both SEK and euros, partly thanks to strong demand for Swedish government securities.
• The positive cost development is partly based on a strong krona and low interest rates – factors that can change rapidly.

For those who want to understand the state's economy, it is important to follow both the development of the debt amount and what it actually costs to finance that debt. As long as interest costs are low, the effect of increased borrowing is dampened, but in the long term, it is important to keep track of how quickly the debt is growing in relation to the state's ability to pay and how sensitive the cost is to changes in interest rates and exchange rates.