Colombo

After a week-long discussion with Sri Lankan authorities, the International Monetary Fund (IMF) has agreed to provide a $2.9 billion extended facility for a four-year period, with conditions on debt restructuring and action on corruption.

The IMF mission led by Peter Breuer and Masahiro Nozaki who were in the island nation from August 24 to September 1, extensively discussed IMF's support for Sri Lanka and the authorities' comprehensive economic reform programme.

"The new EFF arrangement will support Sri Lanka's programme to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, reducing corruption vulnerabilities and unlocking Sri Lanka's growth potential," the IMF announced in a statement on Thursday.

Sri Lanka has been facing its worst economic crisis since it gained independence from Britain in 1948.

With a colossal $51 billion foreign debt, the country was expected to pay $7 billion in debt serving but defaulted in April 2022.

The IMF said Sri Lanka’s economy is expected to contract by 8.7 per cent in 2022 and inflation recently exceeded 60 per cent.

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Sri Lanka was awaiting an IMF bailout to recover from the financial crisis which has led to the acute shortages of essentials like food, fuel and medicine.