<p>Debt financing plays a crucial role in fostering economic development, particularly in developing countries. When strategic debt financing is directed toward policies that promote growth and reforms that enhance efficiency, it can serve as a catalyst for long-term sustainable development. However, excessive indebtedness could pose a significant challenge for emerging economies, potentially impeding their progress toward sustainability. This risk is particularly pronounced in contexts with weak governance, where elevated public debt levels may erode developmental gains and obstruct the transition to sustainable development. Given these complex dynamics, this study investigates the interplay between public debt, governance, and sustainable development in 35 developing countries. The analysis employs the Generalized Method of Moments-Panel Vector Autoregression (GMM-PVAR) as it captures the unobserved heterogeneity and time-invariant observation by employing fixed effects, examining endogenous interactions, dynamic links and possible direction of causality among variables, when the theoretical links among variables are not adequately defined. Additionally, to capture the long-term structural relationships and help understand the dynamics further, the System Generalized Method of Moments (SGMM) models are also used. The findings reveal a nonlinear relationship between public debt and sustainable development. Up to a certain threshold, specifically 27.5% of GDP, public debt contributes to the advancement of emerging economies toward sustainable development. However, beyond this threshold, the positive impact rapidly becomes detrimental as debt levels continue to rise. In contrast, strong governance consistently promotes and sustains sustainable development. These results hold significant implications for policymakers, offering guidance on managing public debt to support long-term sustainability goals.</p>