vscode-powershell: Debug string [DBG] not displayed in the terminal

Prerequisites

• I have written a descriptive issue title.
• I have searched all open and closed issues to ensure it has not already been reported.
• I have read the troubleshooting guide.
• I am sure this issue is with the extension itself and does not reproduce in a standalone PowerShell instance.
• I have verified that I am using the latest version of Visual Studio Code and the PowerShell extension.
• If this is a security issue, I have read the security issue reporting guidance.

Summary

After installing vscode on a new server we noticed that the string [DBG] is no longer displayed on the terminal when debugging code.

Desired result when debugging:

Current result when debugging:

PowerShell Version

Name                           Value
----                           -----
PSVersion                      7.4.1
PSEdition                      Core
GitCommitId                    7.4.1
OS                             Microsoft Windows 10.0.20348
Platform                       Win32NT
PSCompatibleVersions           {1.0, 2.0, 3.0, 4.0…}
PSRemotingProtocolVersion      2.3
SerializationVersion           1.1.0.1
WSManStackVersion              3.0

Name             : Visual Studio Code Host
Version          : 2024.3.2
InstanceId       : 364a3969-9b4f-47b8-91a1-447cc6ec0cf8
UI               : System.Management.Automation.Internal.Host.InternalHostUserInterface
CurrentCulture   : en-US
CurrentUICulture : en-US
PrivateData      : Microsoft.PowerShell.ConsoleHost+ConsoleColorProxy
DebuggerEnabled  : True
IsRunspacePushed : False
Runspace         : System.Management.Automation.Runspaces.LocalRunspace

Visual Studio Code Version

1.87.2
863d2581ecda6849923a2118d93a088b0745d9d6
x64

Extension Version

ms-vscode.powershell@2024.3.2

Steps to Reproduce

Add a breakpoint and press F5

Visuals

No response

Logs

No response