National Debt

National Debt Grew but Became Cheaper – What Does This Mean for Public Finances?

Riksgäldens annual report for 2025 reveals an unusual development: the national debt increased significantly, yet the cost of servicing that debt fell simultaneously. The national debt rose by 93 billion SEK, reaching 1,244 billion SEK by the end of the year, equivalent to 19 percent of GDP. At the same time, the state's cost of debt fell to 13 billion SEK, or 0.2 percent of GDP. This means that while the debt level itself has grown, the cost of managing the debt has actually decreased.

Why Did the National Debt Increase?

The background for this increase is that the state ran a significant budget deficit for the second year in a row. The 2025 deficit amounted to 102 billion SEK, which drove up the need for borrowing. To meet this increased demand, Riksgälden issued more government bonds and resumed borrowing in euros – for the first time since 2018. In June 2025, the state took out a loan of 2 billion euros at an interest rate of 2.097 percent, which was met with strong demand from international investors.

Why Did the Cost of the National Debt Fall?

Despite the growing debt, the interest cost decreased. The primary explanation is that the Swedish krona strengthened during the year. Since part of the national debt is denominated in foreign currencies, and the state manages currency risks using derivatives, a stronger krona makes it cheaper to pay interest and principal on these loans. Thus, it is currency fluctuations rather than lower interest rates on all new loans that have lowered the total cost.

How Does This Development Affect Public Finances and Taxpayers?

• The state has been able to borrow more without the interest cost increasing; on the contrary, it has fallen to a historically low level, both in SEK and as a share of GDP.
• The low cost means the state currently has more room for public spending and investments without the interest burden increasing.
• Strong demand for Swedish government securities, even from foreign investors, shows that Sweden continues to have access to capital markets on favorable terms.

How Should We Interpret the Future Outlook?

The fact that interest costs remain low despite a growing debt can be seen as positive for the short-term stability of public finances. At the same time, it is important to note that the reduced cost is largely due to currency fluctuations – factors that can change rapidly if the krona weakens again. The debt growth is driven by recurring budget deficits, which remains an underlying challenge even if interest costs are temporarily low.

For taxpayers and households, the situation means that the pressure on the state budget from interest expenses is currently low. This gives the government more room for maneuver, but it is no guarantee for the future. If deficits continue and the krona weakens, costs could rise again. Therefore, it is relevant to monitor both the development of deficits and exchange rates going forward.

• The national debt increased by 93 billion SEK to 1,244 billion SEK during 2025.
• The cost of debt fell to 13 billion SEK, primarily thanks to a stronger krona.
• The budget deficit of 102 billion SEK is the driver behind debt growth.
• The government bond rate was set at 2.48% for a short period at the beginning of 2026, but this figure is administrative and not always identical to actual borrowing rates.

It is important to distinguish between the size of the national debt and its cost. The current situation is favorable for public finances, but it is partly based on factors outside the state's control. Continued deficits could lead to higher interest costs in the long run if market conditions change.