The COLOMBO: Sri Lanka will receive a first tranche of US $330 million from the International Monetary Fund in the next two days and, going forward, disbursements would be tied to reviews that take place every six months, an IMF official said on Tuesday.
President Ranil Wickremesinghe said in a statement that he expressed gratitude to the International Monetary Fund and our international partners for their support as we look to get the economy back on track for the long term through prudent fiscal management and our ambitious reform agenda.
Economic mismanagement coupled with the impact of the COVID 19 epidemic left Sri Lanka very short of dollars for essential imports, leading to the country's worst financial crisis in seven decades.
The International Monetary Fund managing director Kristalina Georgieva warned that Colombo must continue to pursue tax reform and greater social safety nets for the poor - and rein in corruption that has been partly blamed for the crisis.
Sri Lanka defaulted on its foreign debt in April 2022 because of a shortage of foreign currency reserves.
The Indian Ocean nation of 22 million people ran out of cash to finance the most essential imports, causing social unrest.
The president Gotabaya Rajapaksa was forced to flee the country and resigned in July due to widespread protests over economic mismanagement, acute shortages of food, fuel and medicines, and runaway inflation.
Wickremesinghe replaced Rajapaksa as president. He has implemented tough spending cuts and tax hikes in an effort to secure the assistance of the International Monetary Fund.
The bailout was approved in September by the International Monetary Fund, but the final approval was held up until China, the island's biggest bilateral lender, agreed to restructure its loans to Colombo.
Beijing had said this year it was offering a two-year moratorium on its loans to Sri Lanka, but the concession fell short of the IMF expectations for the sustainability of the island's debt.
After China agreed to restructure its loans, Wickremesinghe said that the first tranche of the IMF package would be available within the month.
The terms of debt restructuring must be agreed by all parties before June, when the IMF is expected to review the bailout programme, according to officials involved in the negotiations.
One of the officials who asked not to be identified said Sri Lanka will not be able to draw down the second tranche unless a debt restructuring plan is agreed with all creditors.