The International Monetary Fund (IMF) on Monday said its executive board approved a nearly $3 billion bailout for Sri Lanka, and the country's presidency said the programme will enable it to access up to $7 billion in overall funding.

The decision will allow an immediate disbursement of about $333 million, the IMF said, and will spur financial support from other partners, potentially helping Sri Lanka emerge from its worst financial crisis in over seven decades.

IMF Managing Director Kristalina Georgieva said Sri Lanka also needs to undertake various reforms.

"For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported programme with strong ownership for the reforms is critical," Georgieva said in a statement. EFF refers to the IMF's Extended Fund Facility.

She emphasised the need for "ambitious revenue-based fiscal consolidation."

"For the fiscal adjustments to be successful, sustained fiscal institutional reforms on tax administration, public financial and expenditure management, and energy pricing are critical," Georgieva said in the statement.

Sri Lanka's President Ranil Wickremesinghe looks on during an interview with Reuters at Presidential Secretariat, amid the country's economic crisis, in Colombo, Sri Lanka Aug 18, 2022. 

|REUTERS

Sri Lanka President Ranil Wickremesinghe's office said in a statement that the IMF programme will help improve the country's standing in international capital markets, making it attractive for investors and tourists.

Wickremesinghe told the country's parliament earlier that there were signs the economy was improving, but there was still insufficient foreign currency for all imports, making the IMF deal crucial so other creditors could also start releasing funds.

The island nation aims to announce a debt-restructuring strategy in April and step up talks with commercial creditors ahead of an IMF review of a bailout package in six months, its central bank governor told Reuters earlier this month.