Rapid Financing Instrument (RFI)

Recently, the International Monetary Fund (IMF) approved emergency financial assistance of USD 206 million to Sri Lanka under its Rapid Financing Instrument (RFI). The funding is intended to help the country meet urgent balance of payments needs arising from the devastating impact of Cyclone Ditwah.

About the Rapid Financing Instrument

The Rapid Financing Instrument is an IMF facility that provides prompt financial assistance to any IMF member country facing an urgent balance of payments requirement. It is designed to offer rapid and flexible support in times of crisis, without the need for a full-fledged economic reform program. The RFI operates under the General Resources Account (GRA) of the IMF.

Types of Rapid Financing Instrument

Regular Window

The Regular Window of the Rapid Financing Instrument is meant to address urgent balance of payments needs caused by factors such as domestic instability, exogenous shocks, or economic fragility. Under this window, a member country can access financial assistance up to 50 percent of its IMF quota in a year and up to 100 percent of its quota on a cumulative basis.

Large Natural Disaster Window

The Large Natural Disaster Window is applicable in cases where a country experiences a natural disaster that causes damage equivalent to or exceeding 20 percent of its Gross Domestic Product (GDP). This window provides relatively higher access limits, allowing a country to obtain assistance of up to 80 percent of its quota per year and up to 133.33 percent of its quota on a cumulative basis.

Conditionality under the Rapid Financing Instrument

Financial assistance under the Rapid Financing Instrument is provided without ex-post program-based conditionality or periodic reviews, which distinguishes it from traditional IMF lending programs. However, in certain cases, prior actions may be required before the disbursement of funds. The recipient country is expected to pursue appropriate economic policies aimed at resolving the underlying balance of payments difficulties and maintaining macroeconomic stability.

Source: INDIAN EXPRESS

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