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IMF avoids comment on speculation India seeking aid

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(Globalpost/GlobalPost)

The International Monetary Fund declined to comment Thursday on speculation that India, reeling under a currency crisis, may seek IMF assistance.

A wave of poor economic news for India -- the rupee crashed to a new record closing low Wednesday -- has fueled talk that New Delhi might need to seek outside help, particularly from the IMF.

Spokesman Gerry Rice, at a regularly scheduled news briefing, sidestepped a reporter's question for comment on speculation that the Indian government would seek IMF assistance and was considering selling gold to the Washington-based global lender.

"I wouldn't want to speculate on any support or program needs," he said.

Rice pointed to India's economic woes, citing the combination of large fiscal and current account deficits, high inflation and reliance on portfolio inflows as "long-standing vulnerabilities that have now been elevated as global liquidity conditions tighten."

The current situation presents a challenge, he acknowledged, "but also an opportunity for the government to continue on its policy efforts on a number of fronts."

India last called on the IMF for funds in 1991 during a balance of payments crisis that was considered a national embarrassment.

The rupee plunged 3.86 percent on Wednesday, its biggest one-day fall in nearly two decades, to a record closing low of 68.80 to the dollar on worries about a possible US-led military strike against Syria and surging crude oil prices which fanned fears of a financial crisis.

India currently imports about 80 percent of its oil needs.

The currency ended Thursday at 66.55 to the dollar, gaining 3.27 percent, after the Reserve Bank of India (RBI) said it would start providing dollars directly to three major oil importing companies through a separate bank, in a bid to curb the rupee's volatility.

The new central bank measure means state-run Indian Oil, Hindustan Petroleum and Bharat Petroleum can buy from the RBI instead of the open market where they are responsible for most of the dollar demand.

The move means, however, that the RBI will have to dip into its foreign currency reserves, which it recently said were high enough to cover seven months of imports.

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http://www.globalpost.com/dispatch/news/afp/130829/imf-avoids-comment-speculation-india-seeking-aid