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National Debt Rose but Interest Costs Fell – The Krona Provided Unexpected Relief
Riksgäldens annual report for 2025 reveals an unusual situation: Sweden's national debt grew, yet the actual cost of paying interest on the debt was lower than the previous year. At the end of 2025, the national debt amounted to 1,244 billion SEK, an increase of 93 billion compared to the year before. At the same time, the debt-to-GDP ratio rose from 18 to 19 percent.
Larger Debt Despite Lower Interest Costs
This is the second consecutive year that the state has reported a deficit, meaning that state expenditures have exceeded revenues and borrowing has increased. Despite this, the total interest cost on the debt decreased to 13 billion SEK, equivalent to 0.2 percent of GDP. The primary explanation is that the Swedish krona strengthened during the year, which reduced the cost of the portion of the national debt exposed to foreign currencies. It is thus currency fluctuations – not lower interest rates – that have led to lower costs.
What Does This Mean for Sweden's Public Finances?
- The state has been able to finance its deficits at a lower cost than expected thanks to the currency effect, even though the total debt has increased.
- Strong confidence in the market has resulted in high demand for Swedish government bonds, even among foreign investors. This has contributed to stability in the state's borrowing.
- Riksgälden has continued its work to reduce the national debt's exposure to foreign currencies and real debt, which affects the risk and cost profile going forward.
How Can Taxpayers and Households Interpret This Development?
- The lower interest cost means that the burden on the state budget from debt interest is smaller than it would have been if the exchange rate had been weaker – even though the debt itself is growing.
- The fact that the deficit is now a recurring trend, rather than an exception, makes it relevant to monitor how the state manages its borrowing and cost levels in the long term.
- The stability and strong confidence in Swedish government bonds can contribute to a calmer interest rate environment in the economy, but they do not directly affect household mortgage rates or tax levels without other changes.
Important Caveats and Things to Consider
- The cost reduction depends on the exchange rate – if the krona weakens, interest costs could rise again.
- The debt-to-GDP ratio (19 percent of GDP) should not be confused with the actual debt amount in SEK.
- It remains important to monitor the development, especially if the deficits become permanent and if the currency situation changes.
Sweden's national debt
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