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By making the economy more open to trade and to trade disruption, liberalization is likely to enhance an developing country's ability to borrow abroad. In effect, the

penalty for default is increased. In addition, of course, a higher export level reassures prospective lenders about the country's ability to service its debts in the future. Finally, by choosing policies which international lenders consider sound, such as open markets, countries improve lenders assessment of their credit-worthiness.

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Q: Developing country's decision to reduce trade restrictions such as import tariffsaffect its ability to borrow in the world capital market?
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