Why in the News?
The International Monetary Fund has approved USD 206 million in emergency assistance for Sri Lanka under the Rapid Financing Instrument to meet urgent needs caused by Cyclone Ditwah.
What is Rapid Financing Instrument (RFI)
- An IMF facility providing quick financial assistance
• Available to any IMF member country
• Designed for urgent balance of payments needs
• Part of the General Resources Account (GRA)
• Used mainly during crises and emergencies
Types of Rapid Financing Instrument
- Regular Window
• For urgent balance of payments needs due to:
• Domestic instability
• Exogenous shocks
• Fragility
• Access limits:
• Up to 50 percent of quota per year
• 100 percent of quota cumulative - Large Natural Disaster Window
• For balance of payments needs arising from natural disasters
• Damage must be 20 percent or more of GDP
• Higher access limits:
• Up to 80 percent of quota per year
• 133.33 percent of quota cumulative
Example: If a country’s IMF quota = USD 1 billion. Maximum borrowing in one year = USD 500 million
Prelims Pointers
- RFI is different from Extended Fund Facility and Stand By Arrangement
• It does not require long term structural reforms
• Access limits depend on the nature of the crisis
• Linked to IMF quota system
| “Rapid Financing Instrument” and “Rapid Credit Facility” are related to the provisions of lending by which one of the following? (2022)
(a) Asian Development Bank (b) International Monetary Fund (c) United Nations Environment Programme Finance Initiative (d) World Bank |
