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National Debt Grew but Became Cheaper: The Krona Saved the Treasury in 2025
During 2025, Sweden's national debt continued to rise, following a second consecutive year of budget deficits. By the end of the year, the debt amounted to 1,244 billion kronor, equivalent to 19 percent of GDP. Despite the state borrowing more, the actual cost of paying interest on the debt decreased to 13 billion kronor, or 0.2 percent of GDP.
What happened?
- The national debt increased by 93 billion kronor during 2025.
- The cost of paying interest on the debt decreased, landing at 13 billion kronor.
- The Swedish krona strengthened during the year, lowering the cost of the portion of the national debt borrowed in foreign currencies.
- Riksgälden (the Swedish National Debt Office) increased the supply of government bonds to meet the growing borrowing needs.
- A reduction in currency exposure and real debt was initiated according to new guidelines.
Why does it matter?
For public finances, this development means the state has been able to finance its deficits without a significant increase in interest costs on the debt. The stronger krona has contributed to keeping interest expenses down, particularly for loans in foreign currencies. The strong interest in Swedish government securities, among both Swedish and foreign investors, indicates continued confidence in the state's borrowing.
However, it is important to note that the low interest cost is partly an effect of exchange rate movements, and the cost could change if the krona weakens. Since the state continues to run a deficit for the second year in a row, the debt is increasing, which in the long term could affect how large a portion of the state budget needs to be allocated to interest payments if conditions change.
How can the development be interpreted?
- The state's increased borrowing has so far not led to a sharp rise in interest costs, primarily thanks to the stronger krona. This provides some room in the state budget in the short term.
- Taxpayers are not directly affected by the increased debt at present, as the cost of servicing the debt is low. However, if deficits continue and the exchange rate changes, pressure on the state budget could increase in the future.
- Stability in the government securities market and the strong demand for Swedish government bonds are positive for the Swedish economy. This means the state can borrow on favorable terms even when borrowing needs increase.
- Riksgälden's strategy to reduce currency exposure lowers the risk of future cost increases should the krona weaken.
For those following public finances, it is significant to look not only at the debt amount but also at what it actually costs to borrow and which factors influence that cost. As long as interest rates and exchange rates are favorable, the state can manage larger debt amounts, but the development needs to be monitored closely if conditions change.
Sweden's national debt
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