Concept:A balance of payments deficit means a country pays more to foreigners than it earns, so it needs external finance in foreign currency.
Explanation:The deficit must be financed using foreign exchange.
Export diversification and import substitution are long-term measures to reduce the deficit, not immediate financing methods.
Internal borrowing from commercial banks raises local currency, which cannot directly settle foreign payments.
Short-term borrowing from the IMF provides foreign currencies to cover the deficit.
This borrowing must be repaid later with interest.
Answer:C. short-term borrowing from IMF.