Speculations that India might pledge gold with IMF to get loan to prop up the falling rupee have reached Washington, the headquarters of the multilateral institution. However, IMF declined to comment.
The precise question asked at a press briefing to IMF Communications Department Director Gerry Rice was -- there's a lot of speculation about India coming to the IMF, possibly selling its gold reserves to the IMF to prop up its currency. Transcript of the press conference, held yesterday, is posted on IMF web site.
Rice said,"Well, I wouldn't want to speculate on any support or programme needs."
India took loans from IMF thrice — on November, 9, 1981; January 18, 1991, and October 13, 1991, to the tune of $3.9 billion special drawing rights (SDRs), $551.93 million SDRs and $1,656 million SDRs respectively.
India's forex reserves had depleted to $1.2 billion in January 1991, and that too dried up by half by June of that year. This forex reserves could finance only three weeks of essential imports. India had to pledge 67 tonne of gold reserves to seek the IMF loan.
Rice said India faced a number of weaknesses which are now aggravated by the squeeze in global liquidity. However, the current situation presents both--challenges as well as opportunity for India to continue in its policy efforts on a variety of fronts.
"... may be just stepping back on the situation in India, the combination of large fiscal and current account deficits, high and persistent inflation, sizable unhedged corporate foreign borrowing and reliance on portfolio inflows are longstanding vulnerabilities that have now been elevated as global liquidity conditions tighten, and this clearly has affected market confidence," he said.