Finance Minister Magdalena Andersson said that a strong economy with a cash surplus allowed The Swedish Model to continue.
By pursuing a responsible fiscal policy since taking office, we have succeeded in bringing the huge public finance deficit we inherited back to surplus each year of this electoral period, " she said.
"This has placed us in an entirely new position and offers us new opportunities to meet social challenges. The Swedish Model can continue to deliver."
Magdalena Andersson said that public finances had gone from a deficit of more than SEK 60 billion in 2014 to a surplus of SEK 40 billion in 2016.
The government said that the Swedish economy is strong, with growth expected to be high in 2017, forecast at 2.9 per cent.
It said that unemployment "has fallen considerably since 2014" and is expected to continue to fall over the next few years. Youth unemployment is the lowest in 13 years and long-term unemployment has fallen to the lowest rate in the EU, along with Denmark, the government said.
Magdalena Andersson announced a number of new investments, including welfare services.
She pledged SEK 100 million for increased investment in mental health services for children and young people. Another SEK 150 million has been allocated to social care for children and young people.
As revealed earlier this month following criticism of maternity unit closures, the government said that SEK 500 million will go towards maternity services and women's health.
The police, security services, and defence have been boosted by SEK 1.2 billion in total, in response to "events in Sweden and around the world" that have created the need for immediate measures.
In an effort to improve results in education, the government announced that it is investing SEK 11 billion in schools in 2017.
Meanwhile, pensioners will receive a tax cut of up to SEK 200 a month starting next year.
The budget will be debated in parliament on Tuesday. It remains to be seen whether parts or all of the fiscal bill proposal will be rejected by the opposition parties.