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Public Debt Rose but Costs Fell – Strong Krona Brought Unexpected Relief
In 2025, Sweden's public debt increased by 93 billion SEK, reaching a total of 1,244 billion SEK by the end of the year. The debt-to-GDP ratio rose to 19 percent, indicating that the state continued to borrow to cover a budget deficit of 102 billion SEK. Despite the increase in debt, the government's interest costs decreased to 13 billion SEK, equivalent to 0.2 percent of GDP. The primary reason for this cost reduction was the strengthening of the Swedish krona, which made it cheaper to service the currency-exposed portion of the debt.
Why does this matter for public finances and taxpayers?
Typically, a growing public debt leads to higher interest costs, which can impact the flexibility of the state budget. However, in 2025, the stronger krona acted as a buffer, pushing down the cost of public debt, particularly the portion exposed to foreign currencies. This means that the state's interest expenses were lower than expected, despite the increase in debt.
Another stabilizing factor is that the market continues to have high confidence in Swedish government bonds. When the National Debt Office (Riksgälden) issued bonds in euros during 2025, they were met with strong demand and low interest rates. This suggests that investors view Swedish public debt as a relatively safe asset, which can facilitate future borrowing and help keep interest costs down.
How to reason about the development of public debt?
- The lower interest cost means the state can allocate a smaller share of the budget to interest payments for now. However, it is important to note that this cost reduction is primarily due to exchange rate fluctuations; if the krona were to weaken again, interest costs could rise.
- The continued increase in public debt, driven by recurring deficits, needs to be monitored over time. If the debt grows faster than the economy, it could affect the state budget's room for maneuver in the future.
- For taxpayers, the development implies that the pressure on public finances is less acute than the rising debt might otherwise signal. At the same time, long-term sustainability requires that deficits do not become permanent.
- For savers, it may be of interest that Swedish government bonds continue to be in demand, which is a sign of stability in the Swedish financial system.
Facts about public debt in 2025
- Public debt increased by 93 billion SEK to 1,244 billion SEK (19% of GDP).
- The cost of public debt decreased to 13 billion SEK (0.2% of GDP).
- The budget deficit was 102 billion SEK.
- The stronger krona was the main reason for the reduced cost.
- Riksgälden issued 2 billion euros in June 2025 at a low interest rate with high international interest.
- The maturity of public debt remains within the target range (3.5–6 years).
The development in 2025 shows that exchange rate movements can have clear effects on the state's interest costs. Although the increased debt does not immediately mean higher costs for the state or taxpayers, it is important to monitor both the development of the krona's exchange rate and the state's budget balance over time.
Sweden's national debt
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