The International Monetary Fund has approved a further $700 million disbursement to Sri Lanka under its ongoing bailout programme, while urging authorities to accelerate reforms to safeguard the country’s fragile economic recovery.

The latest tranche follows the completion of the fifth and sixth reviews of the four-year, $2.9 billion Extended Fund Facility agreed in 2023 after Sri Lanka’s debt default.

In a statement issued Thursday, the IMF said the reform programme had supported a gradual recovery, with foreign reserves increasing and revenue collection exceeding expectations. However, it cautioned that the economy remains vulnerable to external shocks.

“Sri Lanka is significantly exposed to the Middle East conflict and needs to build back better following Cyclone Ditwah,” the IMF said, stressing the need to maintain reform momentum to ensure macroeconomic stability and inclusive growth.

The approval comes as Sri Lanka continues to contend with rising energy costs linked to the ongoing Iran war and rebuild infrastructure damaged by Cyclone Ditwah, which killed more than 600 people and caused extensive economic losses.

The IMF underscored that strengthening resilience would be critical for the country to withstand future shocks, adding that sustained policy discipline and reform implementation remain key to securing long-term recovery.