Crisis takes its toll on Sweden’s balance sheet

Sweden’s state finances deteriorated markedly during 2009, with the National Debt Office (Riksgälden) reporting a deficit of 176 billion kronor ($24.8 billion) for the year.

Just over half of Sweden’s 2009 deficit, or 95 billion kronor, resulted from loans to the Riksbank designed to help strengthen the central bank’s currency reserves, the debt office said in a statement on Tuesday.

The remaining 81 billion kronor shortfall resulted from lower tax receipts in the wake of the “deep recession”.

The deficit, while slightly better than the Debt Office’s forecast of a 179 billion kronor deficit for 2009, nevertheless marks a sharp reversal for a country which reported a 2008 budget surplus of 58 billion kronor.

“This change indicates the effects of the economic downturn on the central government budget,” the Debt Office said.

Moreover, Sweden’s deficit – excluding lending to the Riksbank – amounted to 2.6 percent of GDP, well below the expected average for other countries in the European Union, where member states’ average budget shortfalls for 2009 are expected to average around 7 percent, according to the European Commission.

Overall central government debt increased by 70 billion kronor from 2008 to 2009, rising to 1,189 billion kronor or 38.5 percent of GDP.

The Debt Office had forecast Sweden’s debt to hit 1,185 billion kronor in 2009, and explained the discrepancy between the size of the deficit and the rise in the overall debt level as resulting from a decrease in short-term investments and currency effects on Sweden’s foreign currency debt.

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