The International Monetary Fund (IMF) has recently approved emergency funding of USD 206 million through its Rapid Financing Instrument to assist Sri Lanka in addressing urgent needs following the catastrophic Cyclone Ditwah.
The Rapid Financing Instrument provides immediate financial assistance to any IMF member country facing an urgent balance of payments crisis. This facility, part of the General Resources Account (GRA), is designed to support countries during times of significant economic distress.
Support provided through the Rapid Financing Instrument comes without ex-post program-based conditionality or reviews, although certain prior actions may apply. The economic policies of the recipient nation should focus on addressing the underlying balance of payments challenges.
The recent implementation of the Rapid Financing Instrument by the IMF highlights the organization's commitment to assisting member countries in times of urgent need. The case of Sri Lanka following Cyclone Ditwah serves as a poignant reminder of the critical role international financial support plays in crisis management.
Q1. What is the purpose of the Rapid Financing Instrument?
Answer: The Rapid Financing Instrument aims to provide immediate financial assistance to IMF member countries facing urgent balance of payments issues, particularly during crises.
Q2. How much funding did the IMF approve for Sri Lanka?
Answer: The IMF approved emergency funding of USD 206 million for Sri Lanka to help address urgent needs following Cyclone Ditwah.
Q3. What types of crises can the Rapid Financing Instrument address?
Answer: It can address crises caused by domestic instability, exogenous shocks, or significant natural disasters that impact a country's economy.
Q4. Are there conditions attached to the funding from the Rapid Financing Instrument?
Answer: Generally, there are no ex-post program-based conditions, but some prior actions may be required to ensure effective use of funds.
Q5. How does the Large Natural Disaster Window work?
Answer: This window allows countries to access up to 80% of their quota if damages from a natural disaster exceed 20% of their GDP.
Question 1: What is the primary purpose of the IMF's Rapid Financing Instrument?
A) To provide long-term loans
B) To offer immediate financial assistance
C) To manage global economic policies
D) To regulate international trade
Correct Answer: B
Question 2: How much of their quota can countries access annually under the Regular Window of the Rapid Financing Instrument?
A) 100%
B) 80%
C) 50%
D) 60%
Correct Answer: C
Question 3: Which situation qualifies for the Large Natural Disaster Window of the Rapid Financing Instrument?
A) Domestic political instability
B) Natural disasters causing significant GDP damage
C) External economic sanctions
D) Trade deficits
Correct Answer: B
Question 4: What percentage of a country's quota can be accessed cumulatively under the Large Natural Disaster Window?
A) 100%
B) 133.33%
C) 150%
D) 120%
Correct Answer: B
Question 5: What type of conditionality is attached to the support from the Rapid Financing Instrument?
A) Strict program-based conditions
B) No ex-post conditions
C) Mandatory reviews
D) High-interest rates
Correct Answer: B
Question 6: What recent event prompted the IMF to approve funding for Sri Lanka?
A) Economic recession
B) Cyclone Ditwah
C) Political unrest
D) Global pandemic
Correct Answer: B
Question 7: What is the maximum percentage of quota a country can access under the Regular Window in a year?
A) 100%
B) 80%
C) 50%
D) 60%
Correct Answer: C
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