Capital flight from a country hinders its ability to service debt and pay for imports.

Name: Capital flight from a country hinders its ability to service debt and pay for imports.
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Question

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Capital flight reduces the amount of domestic currency held by the central bank and residents, leading to a decrease in foreign exchange reserves. This makes it more difficult for a country to service its external debt and pay for imports, as it has fewer resources to exchange for foreign currencies.

Capital Flight from a Country Hinders Its Ability to Service