Sweden’s Finance Minister Svantesson open to borrowing for defence upgrades Rules out tax hikes

Sweden’s Finance Minister Elisabeth Svantesson (Moderate Party) has opposed raising taxes to finance the country’s defence upgrades but has not excluded the possibility of borrowing funds to expedite the process.

“I don’t think we should rule it out, but it must be temporary,” Svantesson said in an interview with SVT, Caliber.Az reports.

Currently, Sweden allocates 138 billion kronor to its defence, which represents 2.4% of the country's GDP. Following the deterioration of the security situation, discussions are underway regarding an increase in defence spending. Within NATO, there is talk of raising the target to 3.5% of GDP, which would require an additional 65 billion kronor from Sweden’s state coffers.

Svantesson believes Sweden is well-prepared, thanks to its strong public finances.

“Both I and previous finance ministers have considered it crucial to maintain order and stability because, in difficult times, we can use that strength. We are much more prepared than other countries,” Svantesson remarked.

In her Agenda interview, Svantesson acknowledged that borrowing could be a viable option for rapidly strengthening the defence sector.

“One of many options to discuss is whether we should borrow for a few years to quickly reach a new level,” she said, adding, “I don’t think we should rule it out, but it must be temporary. Otherwise, we risk accumulating debt in the long term, which we cannot afford.”

However, Svantesson has firmly rejected the idea of financing the upgrades through higher taxes. Instead, she emphasised boosting economic growth, reducing unemployment, and re-prioritising state expenditures as alternative solutions.

“Raising taxes is not on my favourite list because the risk is that it could weaken growth and competitiveness,” she stated.

Meanwhile, Lars Heikensten, Chairman of Sweden’s Fiscal Policy Council, has expressed concern about further straining resources allocated to welfare. He suggests a combination of tax increases and spending cuts to meet future defence costs. He specifically mentioned the possibility of introducing a property tax.

“I’m not particularly fond of tax increases, but I can acknowledge that the societal economic costs of a property tax are not particularly high compared to taxes on labour or capital,” Heikensten noted.

He also expressed caution regarding borrowing for defence upgrades.

“One could borrow a little on the margin, but it’s important that we reach an agreement on this. It will be cheaper for those of us living now – but is it fair? Future generations will have to pay,” he warned.

By Aghakazim Guliyev