Stockholm: Sweden’s right-wing coalition government has unveiled an ambitious $8.5 billion budget for 2026, blending economic stimulus, increased defense spending, and social investments as the country heads toward a general election in September. The plan reflects both domestic economic priorities and heightened concerns over national security, signaling a multi-faceted strategy to address voters’ concerns.
A key feature of the budget is a series of tax reductions aimed at boosting household incomes and encouraging business investment. Income taxes for workers and pensioners are slated for cuts, alongside relief for corporations. In a move designed to reduce the cost of living, the government will temporarily halve the value-added tax (VAT) on food from 12% to 6% between April 2026 and December 2027, potentially saving the average family around 6,500 kronor annually. Prime Minister Ulf Kristersson emphasized that these measures aim to "increase confidence in the future and end the recession," signaling a clear intent to strengthen economic stability ahead of the election.
Security concerns have prompted a sharp rise in defense spending. The government plans to allocate an additional 26.6 billion kronor (around $2.87 billion) to military capabilities, raising total defense expenditure to 2.8% of GDP, with a target of 3.5% by 2028 to align with NATO guidelines. Funds will support acquisitions of advanced air defense systems, rocket artillery, combat ships, and tactical transport aircraft, alongside salary increases for military personnel. Analysts note that the increase demonstrates Sweden’s commitment to regional defense amid growing geopolitical uncertainties in Europe.
Beyond fiscal and security priorities, the budget includes robust investments in social welfare and infrastructure. Funding will be directed toward education, healthcare, civil protection, and housing allowances for low-income families. These measures aim to strengthen Sweden’s social safety net and ensure equitable access to essential services, balancing fiscal responsibility with public support.
Despite the expansive spending, Sweden maintains a relatively strong fiscal position. Government debt stands at approximately 32% of GDP, well below the EU average of 90%. Even with planned increases in defense and borrowing for nuclear power projects, debt is expected to remain under 35% of GDP, offering room for continued public investment without jeopardizing financial stability.
The announcement of the election-year budget highlights the government’s strategy to address economic and security challenges while appealing to voters. With the general election approaching, how effectively these measures translate into tangible benefits for citizens will be closely monitored. Analysts predict that the combination of tax relief, social welfare enhancements, and defense strengthening will play a central role in shaping the political discourse in the months leading up to September.