The absence of government debt is an unusual condition that tells very different stories depending on context. For hydrocarbon-rich states with small populations (Brunei, some Gulf states), accumulated resource revenues eliminate the need for borrowing. For some developing countries, the lack of debt reflects the absence of institutional capacity to issue bonds rather than fiscal prudence.
Modern macroeconomics generally holds that some government debt is desirable. Sovereign bonds serve as safe assets that anchor the financial system, provide collateral for banking, and allow governments to borrow during recessions when private spending collapses. Countries without bond markets lack these stabilization tools and are more vulnerable to economic shocks.
The lowest-debt countries are often those where transparency about government finances is weakest. Some authoritarian regimes may have hidden liabilities (off-balance-sheet borrowing, state-owned enterprise debt, contingent liabilities) that official statistics don't capture. China's "hidden debt" through local government financing vehicles is the most prominent example.
For developing countries, the case for borrowing to invest is strong when the return on investment (better roads, ports, power, education) exceeds the cost of borrowing. A country that maintains zero debt while its citizens lack basic infrastructure may be practicing false fiscal virtue at the cost of development.