Determinants of public debt in ASEAN-4 countries: evidence from panel data analysis (2002–2021)

Public debt is one of the key methods used by governments to finance their expenditure to ensure the continued development of their country, primarily when it is impossible to increase taxes and/or to lower public spending. Growing public debt has become a worrying factor in many emerging countries. In recent decades, a huge number of countries have been adding to the numerical value of public debt due to the expanding size of public debt as well as thoughtless fiscal and budgetary policies. This is a concerning trend, especially when it can result in unsustainable debt that requires monetary financing. The objective of this research is to investigate the factors influencing the public debt level. The empirical analysis uses panel data from 4 ASEAN countries for the period 2002–2021. Furthermore, this research applies the Feasible Generalised Least Squares (FGLS) method. The empirical findings report that public debt responds positively to an increase in the size of expenditure. While an increase in investment and tax revenue will contribute to a decrease in public debt. The government should look into ensuring the sustainability of public debt level growth by making it a mission to reduce government consumption as well as increase tax revenue, and lastly, manage its government investment, as these contribute to the increase and decrease of public debt. However, the task of balancing these three contributing factors is challenging. In general, governments may enhance and strengthen the quality of governance and public institutions by reducing and restructuring government consumption as well as improving tax collection by having a clear approach and strategy on how to execute it.