The Swedish government has presented a new national budget, promising to balance the finances and cut the deficit in 2018, despite increasing spending on a record number of asylum seekers.

Read more

“We are on the road to balance and a substantial surplus,” said Finance Minister Magdalena Andersson, adding that the budget features stable growth, more jobs, falling unemployment and stronger public finances.

Almost half the extra spending, 10 billion krona ($1.16 billion) per year, will be allocated to municipalities and district councils to cope with the flood of refugees.

About 3.5 billion krona ($408 million) has been earmarked for refugee integration, including covering the cost of proposed changes to the Swedish Migration Agency that aims to make it easier for migrants to enter the Swedish labor market.

However, the government is facing a major challenge to find jobs and education for 163,000 refugees who arrived in Sweden last year.

Only 31 percent of refugees find a job or education after a two-year establishment program.

A "lousy" result, according to Labor Market Minister Ylva Johansson.

Local authorities also warn that they will need to cut costs and raise taxes as the state support is not enough.

“It’s really good that we’ve received the 10 billion krona, but it won’t cover the extra costs for migration,” said Annika Wallenskog, chief economist at SKL, the Swedish Association of Local Authorities and Regions, stressing that it would be a huge effort to go forward.

Refugee background checks ‘unaffordable’ – German police union chief https://t.co/4Hr8ZQZ1TDpic.twitter.com/0qrFj4opMT — RT (@RT_com) June 3, 2016

The government forecasts for public finances are too optimistic as investment in key public services such as schools and healthcare might require more than is planned, according to Hakan Frisen, head of economic research at SEB in Stockholm.

“The challenges of migration, the quality of the public sector and perhaps also the housing market are so big and overarching that they require policies that we’re not seeing any first signs of,” the analyst said, stressing that the government didn’t explain how it would solve these issues.