The Rapid Credit Facility (RCF) provides rapid concessional financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need. The RCF was created under the newly established 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. The RCF streamlines the Fund’s emergency assistance, provides significantly higher levels of concessionality, can be used flexibly in a wide range of circumstances, and places greater emphasis on the country’s poverty reduction and growth objectives.
Financial assistance tailored to country needs
Purpose. The RCF provides low access, rapid, and concessional financial assistance to LICs facing an urgent balance of payments need, without the need for program-based conditionality. It can provide flexible support in a wide variety of circumstances, including shocks, natural disasters, and emergencies resulting from fragility. The RCF also provides policy support and can help catalyze foreign aid.
Eligibility. Outright disbursements under the RCF are available to PRGT-eligible members that face an urgent balance of payments need, and where a full-fledged economic program is either not necessary (for instance because of the transitory and limited nature of the shock) or not feasible (for instance because of capacity constraints or domestic fragilities).
Duration and repeated use. Financial assistance under the RCF is provided as an outright disbursement. The facility can flexibly accommodate both one-off disbursements to LICs facing an urgent financing need of limited duration (in particular under the shocks window), and repeated disbursements over a limited number of years, including in cases where the RCF facilitates eventual transition to an ECF arrangement. Repeated RCF disbursements are possible if the balance of payments need is caused by an exogenous shock or the country has established a track record of adequate macroeconomic policies.
Access. Access to RCF financing is determined on a case-by-case basis, taking into account the country's balance of payments need and strength of macroeconomic policies. Under the RCF, access is normally limited to 25 percent of quota per year and 100 percent of quota on a cumulative basis, although augmented access limits apply under the RCF's shocks window (50 percent of quota per year and 125 percent on a cumulative basis).
Fund support under the RCF is provided as an outright disbursement without explicit program-based conditionality or reviews. Economic policies supported under the RCF should aim at addressing the underlying balance of payments difficulties in support of the country's poverty reduction and growth objectives.
Highly concessional lending terms
Financing under the RCF carries a zero interest rate through 2014, has a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities under the PRGT every two years, with the next review expected to take place in end-2014.