The Rapid Financing Instrument (RFI) is a lending facility of the International Monetary Fund (IMF) under which the IMF provides rapid financial assistance to its member countries facing an urgent balance of payments need. This facility is available to all members unlike the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT) which focuses Low Income Countries only. The RFI was created by replacing the IMF’s previous policy that covered Emergency Natural Disaster Assistance (ENDA) and Emergency Post-Conflict Assistance (EPCA).
Creation and Aim of the RFI Scheme
The RFI scheme was created in 2011 as part of a package of reforms to the General Resources Account (GRA) lending toolkit. The primary aim of this facility is to broaden the IMF’s rapid financing assistance and to make the financial support more flexible to address the diverse needs of member countries and can be used in a wide range of circumstances. The RFI is designed for situations where a full-fledged economic program is either not necessary or feasible. RFI can provide support to meet a broad range of urgent needs, including those arising from commodity price shocks, natural disasters, conflict and post-conflict situations, and emergencies resulting from fragility.
Flexibility of the RFI and Its Usage
Generally the access limits for RFI assistance are set at 37.5 percent of quota over any 12-month period and 75 percent of quota on a cumulative basis, net of scheduled repurchases. However, in response to member countries large and urgent financing needs in wake of the current COVID-19 situation, the access limits under the regular window of the RFI have been temporarily (April 6, 2020 to October 5, 2020) increased from 50 to 100 percent of quota per year, and from 100 to 150 percent of quota on a cumulative basis, net of scheduled repurchases. While determining the actual financing amount various factors are considered such as the country’s balance of payments need, capacity to repay, the member’s outstanding Fund credit and its record of using Fund resources in the past.
Cooperation and Policy Proposals by Member Countries
Although the Financial assistance under the RFI is provided without a full-fledged program, the member country 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.
Repayment Terms of the RFI Assistance
The repayment of the financial assistance provided under the RFI is required to be reimbursed within 3¼ to 5 years. While financing under the RFI is often a one-off purchase, the member country may request for a repeated use of the RFI within any three-year period is possible subject to various conditions.
