A sign reading 'No Petrol' is seen at a closed Ceylon Petroleum Corporation fuel station in Colombo Aug 26, 2022. (ISHARA S. KODIKARA / AFP)

COLOMBO - Sri Lanka has made good progress in the negotiations with the International Monetary Fund (IMF), Governor of the Central Bank of Sri Lanka Nandalal Weerasinghe said here on Tuesday night.

The island nation had sought up to US$3 billion from the global lender as it struggles with its worst economic crisis in more than seven decades. Sri Lankans have faced acute shortages of basic goods and sky-high prices for months.

"I can announce that we have made good progress in the negotiations with the IMF. Hopefully, we will be able to reach the first milestone, a staff-level agreement with the IMF soon. Once we reach that agreement with the IMF, it means that we have a credible program in our hands," Weerasinghe said.

Governor of the Central Bank of Sri Lanka Nandalal Weerasinghe said the agreement will come with important policy reforms that are necessary to stabilize and revitalize the country's economy

He said that the agreement will come with important policy reforms that are necessary to stabilize and revitalize the country's economy.

He added that the interim budget, presented to parliament by President Ranil Wickremesinghe on Tuesday, provides the basis for the recovery.

The governor also said that coming out of the crisis will be a painful process for the citizens of the country. However, he was optimistic about the outcome.

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"A lot of businesspersons write to me and tell me that they find it hard to continue because of high interest rates and import restrictions. However, there have been improvements in the past few months. A few months ago, the country was at the verge of shutting down," he said.

On Wednesday, Reuters quoted four sources as saying that a preliminary agreement had been reached and that a formal announcement will be made on Thursday. 

The IMF team held talks with Sri Lankan government officials, including the treasury secretary, late into the night on Tuesday to address concerns on the political front, the sources said. Most of the technical details had been agreed to beforehand.

Staff-level agreements are typically subject to the approval of the IMF management and its executive board, after which the recipient nations get access to funds.

Spokespersons for the Sri Lankan government did not immediately respond to requests for comment.

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