Lower government debt but higher cost in 2022

News 21 February 2023

The highest inflation in three decades and rising market interest rates affected Sweden’s central government debt management in several ways during 2022. On one hand, the new situation contributed to higher tax income and a historically low debt. On the other hand, the cost of the debt increased.

The Swedish National Debt Office has submitted the report Central Government Debt Management – Basis for Evaluation 2022 (in Swedish only) to the Government today. The yearly report describes how the Debt Office conducted borrowing and debt management over the previous year on the basis of the guidelines adopted by the Government.

Year in brief

• The central government budget surplus grew in 2022. This was the result of, among other things, increased tax income due to inflation, and rising electricity prices that led to high congestion revenue for the state.
• The central government debt continued to decrease and was SEK 1,093 billion at year-end. This corresponds preliminarily to 18 per cent of GDP – the lowest level since 1971. 
• The surplus meant that the central government borrowing requirement and the supply of government bonds decreased. Russia’s invasion of Ukraine and rising prices contributed to great uncertainty in the budget forecasts.
• Demand for securities in the auctions continued to be good, but liquidity in the secondary market deteriorated further and received record-low scores in the Debt Office’s annual survey.
• Confidence among market participants in the Debt Office’s strategies and how we implement them increased somewhat during the year. For example, we received higher scores for areas such as contacts and communication.
• The cost of central government debt increased as a result of, above all, higher inflation and a weaker krona. The central government’s interest costs more than tripled from the previous year, to SEK 34 billion.
• Given the high inflation, inflation-linked bonds accounted for the largest annual additional cost since the Debt Office introduced the instrument in 1994.
• The Debt Office closed the position built up since 2018 for a stronger krona against the euro. The result was a small profit.

Read the report here (only available in Swedish): Central Government Debt Management – Basis for Evaluation 2022

More on the results of the annual confidence survey (only available in Swedish)