The Central Bank of Sri Lanka said the economy had grown by a modest 1.6% in the quarter ending September, up from a contraction of 11.5% a year earlier.

The latest growth was due to improvements in the transport, services, and agriculture sectors, the bank said in a statement.

Despite the positive data, overall figures from the first nine months of the year showed a contraction of 4.9%.

The International Monetary Fund has forecast Sri Lanka’s full-year gross domestic product growth in 2023 at negative 3.6%.

The IMF, which on Tuesday released a second tranche of US$337 million as part of a four-year, US$2.9 billion bailout for the island nation, said Sri Lanka had shown signs of economic stabilisation but was not yet out of the woods.

Its economy has shrunk for nine consecutive quarters since the third quarter of 2021.

The country of 22 million people defaulted on its US$46 billion external debt in April last year after running out of foreign exchange to finance imports of food, fuel, medicine, and other essentials.

At the height of last year’s economic crisis, civil unrest forced the ouster of then-president Gotabaya Rajapaksa, when protesters stormed his residence.

His successor Ranil Wickremesinghe has doubled taxes, withdrawn generous energy subsidies, and raised prices of essentials to shore up state revenue.

Sri Lanka announced last month it had struck an “agreement in principle” with its lenders, including China, to restructure nearly US$6 billion in bilateral loans, a key pre-requisite for sustaining the ongoing IMF programme.