Sri Lanka’s macroeconomic policy reforms have “started bearing fruit” and it expects the country to reach an agreement with external commercial lenders soon, the IMF said on Tuesday, ahead of a second review of its $2.9 billion bailout programme for cash-strapped Sri Lanka.

Addressing a press conference on June 7, International Monetary Fund (IMF) Communications Department Director Julie Kozak stressed that Sri Lanka had made “fairly strong progress on the debt restructuring front”.

He said the island nation’s programme performance was “strong”, and most of the quantitative and structural conditions for the second review had been met or delayed. Improvements were still ongoing in some areas, he said.

The second review of the IMF’s Extended Fund Facility under the $2.9 billion bailout to Sri Lanka is scheduled for June 12. Ms. Kozak confirmed that the IMF’s Executive Board will meet to discuss the second review and Article IV consultation.

Under the IMF’s Article IV Agreement, the global lender holds bilateral discussions with its members, usually every year, during which a team of staff visits the country, collects economic and financial information, and discusses the country’s economic developments and policies with officials.

“In Sri Lanka, we are seeing macroeconomic policy reforms begin to bear fruit,” Ms. Kozak said, adding that “commendable results” include rapid inflation reduction, strong reserve accumulation, and early signs of economic growth while maintaining the stability of the financial system.

He said Colombo’s next step on debt restructuring is to complete negotiations with external commercial lenders and implement agreements in principle with official lenders.

Ms. Kozak said Sri Lanka’s domestic debt operation has been largely completed and discussions on debt restructuring are ongoing.

“The officials have held extensive discussions with external official lenders regarding final agreements on the Memorandum of Understanding (MoU) with the Official Lenders Committee and with the Export-Import Bank of China,” he said, adding that talks with the China Development Bank are also in an advanced stage.

“There is a strong expectation that agreements with external commercial lenders will be reached shortly in accordance with the programme parameters. Therefore, overall, our assessment is that there has been fairly strong progress on the debt restructuring front,” he said.

In March, the Washington-based IMF said it had reached a staff-level agreement with Sri Lanka for the next phase, allowing the cash-strapped country to access $337 million from an approved bailout of about $3 billion in 2023. Two tranches of $330 million were released in March and December 2023.

In April 2022, Sri Lanka announced a sovereign debt default for the first time since gaining independence from Britain in 1948.