Analysis of Foreign Debt Determinants of Developing ASEAN Countries

Abstract

The foreign debt of the 6 countries in ASEAN has increased for several years, but uniquely the increase in foreign debt is in line with the increase in foreign direct investment. This study examines and analyzes the effect of Gross Domestic Product, inflation, exchange rates, investment and capital flight on external debt in 6 ASEAN countries during the 1997-2021 period. The study uses panel data regression, after carrying out the Chow test and Hausman test, the estimation used is the Fixed Effect Model (FEM). The results of testing the model show that Gross Domestic Product, inflation and the exchange rate have a significant negative effect on external debt, while investment and withdrawal of capital have a significant positive effect on external debt. The government must concentrate on profitable sectors with a view to increasing the production and income base to minimize foreign debt, create relatively stable macroeconomic and financial conditions and maintain political stability, national defense and social security so that economic actors can feel safe in carrying out economic activities.