UPSC Prelims 2022 Paper 1 (GS) Question Paper with Solutions

# Q1 of 100

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

Options
A.

Asian Development Bank

B.

International Monetary Fund

C.

United Nations Environment Programme Finance Initiative

D.

World Bank

Show Answer
Correct Answer
B International Monetary Fund
Solution

The correct option is International Monetary Fund.

Explanation:
The Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF) are financial assistance mechanisms established by the International Monetary Fund (IMF) to provide quick financial support to member countries facing urgent balance of payments needs.

Here is a step-by-step breakdown of these lending facilities:

1. Rapid Financing Instrument (RFI):
The RFI was created to provide rapid financial assistance to all member countries of the IMF facing an urgent balance of payments need. It replaced the IMF's previous emergency assistance policies (such as the Emergency Natural Disaster Assistance and Emergency Post-Conflict Assistance). The RFI provides support without the need to have a full-fledged economic program in place, making it faster to access during crises like natural disasters, conflicts, or commodity price shocks.

2. Rapid Credit Facility (RCF):
The RCF provides rapid concessional financial assistance to low-income countries (LICs) facing urgent balance of payments needs. It is part of the Poverty Reduction and Growth Trust (PRGT) and offers financial support with zero percent interest rates. Similar to the RFI, it does not require a full program review, allowing for quick disbursement of funds during emergencies.

Therefore, both lending instruments are key provisions managed and offered by the International Monetary Fund (IMF) to address urgent global financial needs.

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