COLOMBO: Sri Lanka and the International Monetary Fund (IMF) have reached a preliminary agreement on an emergency loan to the crisis-hit country and a formal announcement will be made on Thursday, four sources with direct knowledge of the matter said.

The debt laden island nation had sought up to $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.

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

Presenting an interim budget for the rest of the year, Sri Lankan President Ranil Wickremesinghe told parliament on Tuesday that talks with the IMF had reached the “final stage”.

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.

A visiting 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.

The country of 22 million was plunged into political crisis last month when then president Gotabaya Rajapaksa fled after a popular uprising against an acute shortage of basic goods and sky-high prices.

Rajapaksa was replaced by six-time prime minister Wickremesinghe, who also heads the finance department and held several rounds of talks with the IMF team.

The country is also trying to restructure its debt of about $29 billion, with Japan expected to lead talks with other main creditors such as China. Sri Lanka also plans to soon reach out to private creditors that hold the majority of its $19 billion sovereign bonds to start restructuring talks.

Sri Lanka missed interest payments on bonds due on June 3, June 28, and July 18, and a principal payment due on July 25, according to rating agency S&P Global.

The COVID-19 pandemic disrupted Sri Lanka’s tourism reliant economy and slashed remittances from workers overseas.

The damage was compounded by rising oil prices, populist tax cuts and a seven-month ban last year on imports of chemical fertilisers that devastated agriculture.