Sweden to borrow $31 billion to increase defense spending

On June 19, the Swedish government agreed to borrow 300 billion kronor to finance rearmament and achieve NATOʼs goal of defense spending of 3.5% of GDP by 2032.

Reuters reports this.

Russia’s invasion of Ukraine has forced Sweden to rethink its security doctrine, the article says. Stockholm joined the alliance in 2024. The country’s defense spending has already doubled since 2020, to about 2.4% of GDP. NATO is expected to set an even higher bar at its summit in The Hague in June.

The priorities will be to expand the size and capabilities of the army, strengthen air defense, and increase ammunition supplies. The bulk of the funds — 250 billion crowns — will go to military needs, with another 50 billion going to civil defense and infrastructure.

“We are doing this so that our children and grandchildren do not have to learn Russian,” said Finance Minister Elisabeth Svantesson.

Swedenʼs public debt is currently around 32% of GDP, compared to an EU average of 90%. Defence spending will increase public debt by around 3%, Svantesson added.

Sweden will also temporarily suspend strict budget rules, but public finances must be balanced again by 2035. This means that future governments will have to either raise taxes or cut spending in other areas of the budget.

The largest opposition political force, the Social Democratic Party of Sweden, is proposing to create a "preparedness fund".

"Whatever we call it, we will either have to increase revenues or cut spending," says Mikael Damberg, economic spokesman for the Social Democrats.

The head of the Ministry of Finance ruled out raising taxes. She is convinced that funds can be found by reviewing other expenses.

What preceded

The US President Donald Trump has repeatedly demanded that European leaders invest more money in NATO. He has previously said that he would “encourage” Russia to “do whatever it wants” with NATO member states that have failed to meet their financial obligations to the Alliance.

NATO Secretary General Mark Rutte is confident that countries can achieve 5% of GDP in defense spending. But at a press conference in early June, he told reporters that the timeline “remains subject to consultation.”

Bloomberg reported that the NATO Secretary General’s Office had circulated a proposal that set a 2032 deadline. Italian Foreign Minister Antonio Tajani said on June 12 that ten years was a reasonable time to achieve the goal. Other alliance members have called for faster action.

In May, the Financial Times reported that Spain remained the last major NATO member that had not yet agreed to US President Donald Trumpʼs plan to increase defense spending to 5% of GDP by 2032.

Secretary General Rutte stated at the G7 leadersʼ summit in Canada that by 2025, defense spending of all Alliance members will reach 2% of GDP.

• As of 2024, the Alliance leaders in defense spending as a percentage of GDP were Poland (4.12%), Estonia (3.43%), the United States (3.38%), Latvia (3.15%), and Greece (3.08%).

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