Download or read book Foreign Borrowing and Export Promotion Policies written by International Monetary Fund and published by International Monetary Fund. This book was released on 1989-01-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers the problem of allocation of investment for a debtor country that faces a ceiling on the amount of foreign debt it can accumulate. It shows that it is optimal for the debtor country to create a more open economy by favoring investment in the export sector over investment in the import-competing sector. The reason is that a more open economy is more sensitive to trade sanctions and therefore more creditworthy in international markets. Because international creditworthiness is basically an externality, there is a role for policy to provide higher returns to export producing activities.