Sri Lanka will receive the first tranche of its bailout amounting to $330 million (€307.51 million) within the next two days, the International Monetary Fund (IMF) said on Tuesday.

Sri Lanka received a much-needed economic boost after the IMF approved a $3 billion bailout to the cash-strapped nation on Monday.

The country's economy had been in dire straits due to economic mismanagement, exacerbated by the impact of the COVID-19 pandemic.

The loan, which was delayed for some time, was approved after China, Sri Lanka's biggest bilateral lender, offered debt relief assurances.

Bailout conditional on tackling corruption

The IMF, however, has warned Sri Lanka that it must not allow entrenched corruption to undermine the bailout.

The onus is on the country to rein in its debt to sustainable levels, the IMF said.

The release of the IMF's bailout package is expected to catalyze additional financial support from other institutions.

The crisis-hit nation's president, Ranil Wickremesinghe, said the program will enable the country to access up to $7 billion in overall funding.

"Sri Lanka is no longer deemed bankrupt by the world," Wickremesinghe said in a video statement.

Austerity measures necessary but unpopular

Sri Lanka went to the Washington-based lender of last resort shortly before defaulting on its $46 billion foreign debt last April, as the critical shortage of foreign exchange had left the island nation unable to finance even the most essential imports.

The crisis had caused severe food and fuel shortages, rampant inflation, and rolling blackouts, inflaming public anger.

The former president, Gotabaya Rajapaksa, had been accused of squandering public money on vanity projects backed by unsustainable loans from China, which owns around 10% of Sri Lankan debt.

His successor, Ranil Wickremesinghe, has committed to tough reforms, including the doubling of taxes and an end to generous fuel and electricity subsidies, to bring state finances back under control.

However, the austerity measures have been unpopular and have prompted strikes that crippled the health and transport sectors.

Despite the challenges, Sri Lanka's state minister of finance, Shehan Semasinghe, said the IMF bailout was "absolutely essential" for the country.

"But now we have to patiently focus on very difficult reforms going ahead. We have to continue to work together to rebuild Sri Lanka's economy and move it towards recovery," he said in a statement.

ss/es (Reuters, AP, AFP)