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National Debt Surpassed 1.2 Trillion – But Costs Decreased in 2025
By the end of 2025, Sweden's national debt had risen to 1,244 billion SEK, an increase of 93 billion during the year. Consequently, the debt-to-GDP ratio rose from 18 to 19 percent. Despite the growth in debt, the state's cost of managing the debt decreased to 13 billion SEK, equivalent to 0.2 percent of GDP.
What drove this development?
- The state ran a deficit for the second consecutive year. This means expenditures exceeded revenues, increasing the need for borrowing.
- The Swedish krona strengthened during the year. Since part of the national debt is exposed to other currencies, the cost decreased as the krona became more valuable compared to these currencies.
- Riksgälden (the Swedish National Debt Office) continued to reduce currency exposure in the debt and also began reducing the real debt, in line with new guidelines.
- Demand for Swedish government bonds was strong, particularly from foreign investors, which facilitated borrowing.
Why do these changes matter for public finances and taxpayers?
A growing national debt means the state is taking on larger commitments that must be managed over time. If deficits continue, the debt burden could increase further, potentially affecting how the state prioritizes between various expenditures and revenues in the future. This, in turn, can impact the flexibility of the state budget.
At the same time, the reduced cost of interest and management shows that exchange rate movements – in this case, a stronger krona – can help dampen the state's interest costs. This reduces the burden on the state budget in the short term, even as the debt grows. However, it is important to note that this cost reduction is primarily linked to currency fluctuations and not to lower interest rates on the loans themselves.
How can the development be interpreted?
- A continued increase in the national debt, especially if driven by recurring deficits, could eventually mean the state needs to adjust its economic policy to manage a larger debt burden. This does not mean taxes or fees will be immediately affected, but it could influence the state's future priorities.
- The strong krona has given the state lower interest costs for the portion of the debt exposed to currency risk. If the krona weakens in the future, this effect could change.
- Strong demand for Swedish government bonds, particularly from foreign investors, indicates continued confidence in Sweden's public finances. This makes it easier and cheaper for the state to borrow on the market, providing some flexibility even as the debt grows.
Looking ahead
The cost of the national debt is currently low thanks to currency fluctuations, but the underlying deficit points to a structural challenge for the state budget. If deficits continue, the national debt may grow further, and then future interest rate hikes or currency devaluations could quickly increase costs. It is therefore important to monitor both the size of the debt and the state's ongoing budget balance, as well as how Riksgälden manages risks in borrowing.
Sweden's national debt
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