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Public Debt Rose Sharply in 2025 – But Interest Costs Fell
During 2025, Sweden's public debt increased by 93 billion SEK to a total of 1,244 billion SEK. The debt ratio, i.e., debt in relation to gross domestic product (GDP), rose from 18 to 19 percent. At the same time, the state's cost of paying interest on the debt decreased to 13 billion SEK, which corresponds to 0.2 percent of GDP. The main explanation for the lower cost is that the Swedish krona strengthened, which reduced expenses for the portion of the debt issued in foreign currencies.
Why does this development matter?
- A growing public debt means the state continues to borrow to finance budget deficits – 2025 was the second consecutive year with a deficit.
- Despite the increased debt, interest costs have decreased, which temporarily gives the state budget more room for other expenditures.
- The stronger krona has acted as a buffer and reduced the costs of the state's loans in foreign currencies. However, this effect can change quickly if the krona weakens again.
- Demand for Swedish government bonds was strong, even among foreign investors, which can be interpreted as continued confidence in Sweden's economy.
How can the development be interpreted from a public finance perspective?
- It is unusual for the state's interest costs to decrease while the debt grows. This provides some breathing room in public finances, but the cost reduction is primarily linked to the exchange rate and not to lower interest rates in general.
- The increased debt ratio shows that the state's long-term financing needs are rising. This means that the state budget could be affected in the long term if the debt level continues to rise.
- There is currently no immediate pressure to change taxes or welfare expenditures due to interest costs, but if the krona weakens or the debt continues to increase, the situation could change.
- The state continues to have good access to financing on reasonable terms, which reduces the risk of rapid cost increases. At the same time, a growing debt requires continued careful risk management and monitoring of exchange rate developments.
Things to keep in mind going forward
- The state's costs for the debt can increase rapidly if the krona weakens against other currencies.
- A larger debt means that future budgets may have less room for maneuver if the interest rate environment or the exchange rate worsens.
- It is important to follow the National Debt Office's reports to understand how public debt develops and how costs are affected by changes in interest rates and exchange rates.
Sweden's national debt
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