Question
Q1) “Rapid Financing Instruments” and “Rapid Credit Facility” are related to the provisions of lending by which one of the following?
- Asian Development Bank
- International Monetary Fund
- United Nations Environment Programme Finance Initiatives
- World Bank
Answer: b
Detailed Explanation
Rapid Financing Instrument (RFI) :
- It provides rapid financial assistance, which is available to all member countries facing an urgent balance of payments need.
- It was created as part of a broader reform to make the IMF’s financial support more flexible to address the diverse needs of member countries.
- It replaced the IMF’s previous emergency assistance policy and can be used in a wide range of circumstances.
Rapid Credit Facility (RCF) :
- It provides rapid concessional financial assistance to low-income countries (LICs) facing an urgent balance of payments (BoP) need with no ex-post conditionality where a full-fledged economic program is neither necessary nor feasible.
- It was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of LICs, including in times of crisis.
There are three windows under RCF:
A regular window for urgent BoP needs to be caused by a wide range of sources including domestic instability, emergencies and fragility;
An exogenous shock window for urgent BoP needs to be caused by a sudden, exogenous shock; and
A large natural disaster window for urgent BoP needs arising from natural disasters where damage is assessed to be equivalent to or exceeding 20 percent of the member’s GDP.
Access under the RCF is subject to annual and cumulative limits, with higher access limits applying for the large natural disaster window.
For non-PRGT eligible countries, a similar Rapid Financing Instrument (RFI) is available for higher-income countries. Hence, Option 2 is correct.
Extra:
International Monetary Fund (IMF):
The formation of the IMF was initiated in 1944 at the Bretton Woods Conference. IMF came into operation on 27th December 1945 and is today an international organization that consists of 190 member countries.
Headquartered in Washington, D.C.
IMF focuses on fostering global monetary cooperation, securing financial stability, and facilitating and promoting international trade, employment, and economic growth around the world. The IMF is a specialized agency of the United Nations
