Rapid Financing Instrument and Rapid Credit Facility are related to the provisions of lending by whi

Question

Rapid Financing Instrument and Rapid Credit Facility are related to the provisions of lending by which one of the following?

Accepted Answer

Recent context: The Finance minister of Sri Lanka has started bailout talks with the lender of last resort (IMF) and seeking IMF’s rapid financial assistance to tackle growing shortages of food, fuel and medicines. The Rapid Financing Instrument (RFI) provides rapid financial assistance, which is available to all member countries facing an urgent balance of payments need. The RFI 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. The RFI replaced the IMF’s previous emergency assistance policy and can be used in a wide range of circumstances. Financial assistance under the RFI is provided in the form of outright purchases without the need for a full-fledged program or reviews. A member country requesting RFI assistance is required to cooperate with the IMF to make efforts to solve its balance of payments difficulties and to describe the general economic policies that it proposes to follow. Prior actions may be required where warranted. The Rapid Credit Facility (RCF) of IMF 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. The RCF 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. Hence option (b) is the current answer.