When a full program is not deemed required or possible and the need is immediate, the RCF provides quick, low-access, and concessional financial support to LICs confronting an urgent BoP requirement, without ex-post conditionality.
It can help in a range of situations, including natural disasters, shocks, and emergencies caused by fragility. The RCF also offers policy advice and may be able to help stimulate international aid.
Read the article below to know all about rapid financing instruments and rapid credit facilities.
Rapid Financing Instrument and Rapid Credit Facility
The RCF is available to PRGT-eligible members who are facing fast payments, where a full-fledged economic program is either not necessary (for example, due to the shock’s transitory and limited nature) or not feasible (for example, due to the shock’s transitory and limited nature).
If the balance of payments needs is predominantly triggered by an exogenous shock, or if the government has established a 6-month track record of sufficient macroeconomic measures before the request, the RCF can be used again. Every 12 months, however, no more than two disbursements may be made.
Rapid Financing Instrument UPSC
Access limits under the exogenous shock window and big natural disaster window were temporarily increased in response to members’ large and urgent Covid-19-related finance needs.
Until December 31, 2021, the exogenous shock window’s access limits were temporarily enhanced from 50 to 100 per cent of quota every year, and from 100 to 150 per cent of quota cumulatively.
Until December 31, 2021, access limits under the large natural catastrophe window were also temporarily enhanced from 133.33 to 183.33 per cent of quota and 80 to 130 per cent of quota per year cumulatively.
Rapid Credit Facility UPSC
RCF financing is granted on a case-by-case basis, taking into account the country’s balance of payments needs, the robustness of its macroeconomic policies, the country’s ability to repay the Fund, the amount of outstanding Fund credit, and the member’s previous usage of Fund credit.
RCF financing also takes into account the characteristics and size of underlying shocks. Both regular and exogenous shock window access is limited to 50 per cent of quota per year and 100 per cent of quota cumulatively, with regular window annual access subject to a 25 per cent quota norm.
UPSC Exam Notes
Although prior steps are often required, fund support under the RCF is delivered without ex post-program-based conditionality or evaluations. Economic strategies backed by the RCF should strive to address the country’s underlying balance of payments problems while also supporting its poverty reduction and growth goals.
UPSC Exam Preparation: Questions with Answers
“Rapid Financing Instrument” and “Rapid Credit Facility” are related to the provisions of lending by which one of the following?
A) Asian Development Bank
B) International Monetary Fund
C) United Nations Environment Programme Finance Initiative
D) World Bank
Subject- Current Affairs
Topic- International Institutions
Difficulty Level – Easy
Explanation: The Rapid Financing Instrument (RFI) provides immediate financial support to all member countries experiencing a balance-of-payments crisis. The RFI was established as part of a larger reform to make the IMF’s financial assistance more flexible to meet the different needs of its members. The RFI, which replaced the IMF’s prior emergency assistance strategy, can be employed in a variety of situations.
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Yes, you read that correctly. On the UPSC Pathshala website, you may access all the latest news from around the country and the world, as well as a detailed analysis of the Essence – A Current Affairs monthly edition. It includes content connections for both the prelims and main papers.
We hope and feel that the speedy financing and credit facility described in this post have been of great use to you. You can go to the UPSC Pathshala website for more general studies, current affairs or any other UPSC notes and related information.