Government spending in developing countries affects the economy differently depending on how it's financed. When government debt is funded from abroad, it can lead to a stronger currency, reducing exports and the impact of spending. The effect is more pronounced when country risk is high. Spending is more effective when focused on domestic goods, in sectors with less flexibility, and with a stable exchange rate. Whether deficits in government and trade balance are linked depends on how much of the debt is held by foreign investors.