Sri Lanka defaulted on its foreign debt of US$46 billion in April 2022 after running out of foreign exchange to finance imports such as food, fuel and medicines.

The last government reached a roughly US$3 billion, four-year bailout loan from the IMF, and embarked on a reform process which involved cutting subsidies, and raising taxes to stabilise the economy.

That painful reform programme has continued under the new leftist administration of President Anura Kumara Dissanayake.

“Sri Lanka’s ambitious reform agenda continues to deliver commendable outcomes,” IMF Sri Lanka mission chief Evan Papageorgiou said in a statement following discussions in Washington, confirming the fourth review of the programme.

“The post-crisis growth rebound of 5% in 2024 is remarkable,” he continued, commending the country’s “substantial” fiscal reforms and adding that revenues had improved, official reserves had reached US$6.5 billion, and the country’s debt restructuring process was “nearly complete.”

Once approved by the IMF’s executive board, the agreement, announced on Friday, will make available around US$344 million in much-needed funds to support the Sri Lankan economy.

That would bring the total disbursed under the current programme to around US $1.7 billion, the IMF said.