New Delhi, Aug 31 (KNN)  The depreciating rupee value poises both challenges and opportunities for India, the International Monetary Fund (IMF) has said.

“The current situation presents a challenge, obviously, to the government of India, but also an opportunity for the government to continue in its policy efforts on a variety of fronts,” said IMF spokesman Gerry Rice earlier this week.

Speaking to the reporters about the speculation about India coming to the IMF, possibly selling its gold reserves to the IMF to prop up its currency, Rice said “I wouldn't want to speculate on any support or program needs.

“But maybe 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,” Rice added.

India had taken loans from the IMF on three occasions - November 9, 1981, January 18, 1991 and October 13, 1991 of USD 3.9-billion special drawing rights (SDRs), USD 551.93-million SDRs and USD 1,656-million SDRs, respectively.

With India’s foreign exchange reserves at USD 1.2 billion in January 1991 and depleted by half by June, barely enough to last for roughly 3 weeks of essential imports, India was only weeks way from defaulting on its external balance of payment obligations, according to media reports. (KNN/SD)