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National Debt Rose to SEK 1,244 Billion – But Interest Costs Dropped Significantly
At the end of 2025, Sweden's national debt amounted to SEK 1,244 billion, an increase of SEK 93 billion compared to the previous year. The debt-to-GDP ratio, which represents the national debt in relation to GDP, consequently rose from 18 to 19 percent. Despite the state borrowing more, the cost of servicing the debt decreased: interest expenses fell to SEK 13 billion, equivalent to 0.2 percent of GDP.
Why Was the Interest Cost So Low Despite Increased Debt?
The reduced interest cost is primarily due to the strengthening of the Swedish krona against other currencies during the year. Since part of the national debt is denominated in foreign currencies, a stronger krona makes it cheaper for the state to pay interest and principal on that portion of the debt. However, this is an effect that could change if exchange rates develop differently in the future.
What Does This Development Mean for Public Finances and Taxpayers?
- The state has continued to finance deficits by borrowing more, which has increased the total debt. This marks the second consecutive year of budget deficits.
- The lower interest cost currently means less strain on the state budget, but it does not reflect the actual debt burden; it is largely driven by exchange rate fluctuations.
- If deficits continue and the debt-to-GDP ratio rises further, a larger portion of the state budget may need to be allocated to interest payments should interest costs increase again.
- The market for Swedish government bonds is stable with high demand, which has so far provided the state with favorable borrowing terms. However, this could change if the budget situation deteriorates or if the krona weakens.
How Can This Information Be Interpreted and Used?
- Lower interest costs are positive for public finances in the short term, but this does not mean the state is less indebted – the debt amount has clearly increased.
- The cost reduction is primarily linked to the exchange rate, meaning it could change rapidly if the krona weakens.
- The rising debt-to-GDP ratio is something that should be monitored closely. If the trend of deficits continues, it could eventually affect the state's ability to prioritize expenditures within the budget.
- For those following public finances, it is important to distinguish between the size of the debt and its current cost, as well as to be aware of the uncertainty surrounding the future development of exchange rates.
Key Considerations for the Future
- Interest costs could rise if the krona weakens or if the global interest rate environment changes.
- The state has reduced its currency exposure, but a certain portion of the debt remains sensitive to exchange rate fluctuations.
- Continued deficits mean that the debt level could continue to rise, which could impact future state budgets and economic policy space.
Sweden's national debt
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