Sweden Unveils $8.5 Billion Election-Year Budget with Tax Cuts and Higher Military Spending

The Swedish government announced on Monday that its 2026 budget will inject around 80 billion crowns ($8.5 billion) into the economy, as the right-wing coalition seeks to boost sluggish growth ahead of next September’s general election.

In a statement on the budget bill to be presented to parliament, the government said: “The strength of Sweden’s public finances is now being used to ensure that hardworking people have more money in their pockets. This can help restore confidence in the future and bring an end to the downturn.”

Key measures include tax cuts for workers, pensioners, and businesses, lower VAT on food, and increased defense spending—making this the most expansive fiscal package since the Covid-19 pandemic. Additional provisions include higher allocations for schools, healthcare, and civil security, as well as increased housing benefits for low-income families. Most of the measures had been signaled earlier.

Like many EU economies, Sweden has been struggling with weak growth as households and businesses remain uncertain amid the fallout from the global trade wars launched by former U.S. President Donald Trump, while still coping with the lingering effects of inflation that peaked above 10%.

Unlike countries such as France, which are grappling with debt and forced to rein in spending, Sweden still has room for fiscal generosity. Government debt stands at about 32% of GDP, compared to an EU average of around 90%. Even with commitments to raise defense spending to 3.5% of GDP and borrow nearly 220 billion crowns to build new nuclear power plants, the debt ratio is expected to remain below 35%.

($1 = 9.4165 Swedish crowns)