National Debt

Public Debt Grew in 2025 – But Interest Costs Fell, Partly Due to a Stronger Krona

During 2025, Sweden's public debt increased by 93 billion SEK, reaching 1,244 billion SEK, equivalent to 19 percent of GDP. This increase is due to the state running a deficit for the second consecutive year, meaning expenditures exceeded revenues, requiring the state to borrow more to cover the difference.

Why Public Debt Became Cheaper Despite Growing

What is particular about this year's development is that the cost of paying interest and currency hedging on public debt decreased to 13 billion SEK, or 0.2 percent of GDP. The primary explanation is that the Swedish krona strengthened during the year. Since parts of the public debt are denominated in foreign currencies, a stronger krona makes it cheaper for the state to repay these loans and to hedge against currency fluctuations. The exchange rate has thus acted as a buffer against rising interest costs, despite the growth in debt.

What Does This Mean for Public Finances and Taxpayers?

• Under current conditions, the state can borrow more without increasing the interest cost for the state budget. This currently reduces pressure on the budget's interest expenditures.
• A strong krona has reduced the state's repayment burden on loans in foreign currencies. Conversely, a weaker krona in the future could increase costs, making the exchange rate an important risk factor to monitor.
• The increase in public debt due to recurring deficits signals that the state's finances are under strain. If this trend continues, measures may eventually be needed to restore balance.
• Riksgälden's decision to reduce real debt (debt linked to inflation) demonstrates caution regarding future inflation risks, which could affect the state's future costs.

How Can This Development Be Interpreted?

For those following the state's economy, this year's paradox – higher debt but lower cost – is an example of how exchange rates and market conditions affect the state's expenses. It also shows that public debt does not automatically mean higher expenditures for the state every year; rather, the composition of the debt and external factors are of great significance.

However, it is important to note that the lower cost is largely due to factors the state does not control itself, such as the exchange rate. If the krona were to weaken in the future, the state's interest costs could rise. At the same time, recurring deficits mean the debt could continue to grow, which could eventually affect the development of public finances.

For taxpayers and those interested in the macroeconomy, this development highlights the importance of monitoring both the debt amount and the cost of the debt – and understanding the factors behind changes in the state's economy.

• The state's increased borrowing has led to more government bonds on the market, which can affect interest rates in general. However, no immediate effect on household interest rates or taxes can be deduced solely from this development.
• Increased demand for Swedish government securities among foreign investors indicates continued confidence in Swedish public finances, but currently mainly affects Riksgälden's ability to finance the deficit on reasonable terms.

In summary, the development in 2025 shows that the state's economy is influenced by several factors beyond its own budget work, and that risks of future cost increases remain even though the situation for the state budget is currently favorable.