Risk of inadequate budgetary discipline and unsustainable public finances
In its Budget Bill for 2026, the Government has announced a fundamental change to the fiscal policy framework. The Swedish National Audit Office recommends that the Government consider other alternatives, as the announced changes risk leading to weakened budgetary discipline and unsustainable public finances in the long term.
The Swedish National Audit Office has reviewed the Government’s Spring Fiscal Policy Bill for 2025 and the Budget Bill for 2026. The overall conclusion is that the proposed fiscal policy does not meet the requirements of the fiscal policy framework on a number of points.
The Swedish National Audit Office also notes, in particular, the changes to the framework itself that were announced in the Budget Bill. They involve replacing the surplus target for net lending with a (lower) balance target, and the possibility of exempting certain expenditure items from the new balance requirement. These changes have already been politically anchored in a cross-party agreement.
It is the assessment of the Swedish National Audit Office that allowing certain expenditure items to deviate from the net lending target – and formalising this as part of the framework – can lead to negative effects, as it risks weakening budgetary discipline and creating uncertainty on the fiscal policy rules that apply in the long term.
“The principle of regarding the budget as a whole, in which all measures are included in a comprehensive review, has been instrumental for the good order in Sweden’s public finances. Departing from this principle can lead to an unsustainable level of public sector debt in the long term,” says Auditor General Christina Gellerbrant Hagberg.
The Swedish National Audit Office considers that it would be more reasonable to consider adjusting the level of the net lending target to reflect existing ambitions and agreements, rather than handling certain expenditure items separately (through loan financing) outside the target.
This would increase transparency and contribute to confidence in the fiscal policy framework and its follow-up. It would also strengthen the prospects for the framework to continue to support sound fiscal policy.
This audit also shows that, as early as in next year’s budget, the Government intends to deviate from the current surplus target and the proposed balance target for net lending, which is proposed to take effect in 2027, throughout its entire period of validity.
The Swedish National Audit Office also notes that the Government is not transparent as required by the framework. For example, given the Government’s account, it is not possible to determine whether fiscal policy is well-balanced in light of the economic situation.
“The Government is proposing a very expansionary fiscal policy without having made any calculations as to whether it is needed,” says Hedvig Wurnell, project leader for the audit.
Recommendations in brief
The Swedish National Audit Office’s recommendations to the Government include working to ensure that the fiscal policy framework will continue to disallow deviations from the general government saving target, with respect to specific expenditure items.
The fiscal policy framework
The fiscal policy framework was introduced in the late 1990s in response to a deep public finance crisis a few years earlier. The framework was introduced with broad political support in the Riksdag to ensure a long-term sustainable and transparent fiscal policy.
The framework contains budgetary policy targets, the most central of which is the target for general government net lending. A surplus target is currently in place, and there is a proposal for a balance target as from 2027.
Another key element of the framework is the stringency of the central government budget process. A predetermined fiscal space is allocated to different areas of use, in which different purposes are weighed against each other.