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National Debt Rises Above 1.2 Trillion – But Interest Costs Drop Sharply
Riksgäldens annual report for 2025 shows that Sweden's national debt increased by 93 billion kronor, reaching 1,244 billion kronor by the end of the year, equivalent to 19 percent of GDP. This marks the second consecutive year that the state has reported a budget deficit, meaning borrowing continues to cover expenditures. At the same time, the state's cost of servicing the debt fell to 13 billion kronor, or 0.2 percent of GDP.
Strong Krona Pressed Down Loan Costs
The cost reduction is primarily due to the strengthening of the Swedish krona during the year. Since part of the national debt is exposed to foreign currencies, a stronger krona makes it cheaper for the state to repay these loans. This has provided temporary relief to public finances, even though the actual debt has grown.
Increased Borrowing and Changed Debt Structure
To meet the deficits, Riksgälden has increased the supply of government bonds, and demand for these securities has been strong – even among foreign investors. At the same time, Riksgälden has begun reducing the so-called real debt (the portion of the debt linked to inflation) according to new guidelines, which could affect the national debt portfolio's sensitivity to future inflation changes.
What Does This Mean for the State Budget and Taxpayers?
- The state is borrowing more, but the interest cost per borrowed krona is currently low thanks to currency developments.
- A growing debt could eventually mean the state needs to prioritize between different expenditures if interest rates rise or the krona weakens again.
- The strong demand for Swedish government securities shows that investors continue to have confidence in Sweden's economy, which facilitates borrowing and contributes to lower financing costs.
- For savers, a strong krona often means lower returns on foreign assets, but at the same time, more stable Swedish government bonds.
Key Things to Watch Moving Forward
- The cost reduction is strongly linked to the exchange rate – if the krona weakens, interest costs could rise again.
- Despite lower interest costs, deficits continue to build up the debt, increasing the long-term debt burden.
- The difference between nominal debt and real debt is important for understanding the state's long-term exposure to inflation and interest rate changes.
Summary
Developments in 2025 show that the state budget is currently managing a higher debt level without an increase in interest costs. However, since this is largely due to the exchange rate, it is important not to take today's low costs for granted. If the interest rate environment or the value of the krona changes, it could quickly become more expensive for the state to borrow, which could affect the future maneuvering room in the state budget. The situation looks favorable right now, but continued vigilance regarding debt levels and cost developments is warranted.
Sweden's national debt
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