Colombo: Sri Lanka will borrow $1.5 billion from the International Monetary Fund (IMF) for the government’s economic reform agenda, the IMF said on Friday.

Todd Schneider, IMF mission chief for Sri Lanka, said a staff-level agreement was reached on a three-year programme to be supported by the IMF’s Extended Fund Facility (EFF).

“Formal approval of the EFF is expected to catalyse an additional $650 million in other multilateral and bilateral loans, bringing total support to about $2.2 billion (over and above existing financing arrangements),” the IMF said.

An EFF is designed to provide assistance to countries who experience serious payments imbalances because of structural impediments or characterised by slow growth and an inherently weak balance of payments position.

Sri Lanka’s new government made an official request for a fresh bail out package from the IMF this year to help tackle a widening balance of payment deficit.

However, the fund turned down the request initially, saying the country’s reserves were at a comfortable level then.

The IMF lent $2.6 billion to Sri Lanka in 2009 to help it recover from the impact of the global financial crisis and return the country to long-term, sustainable growth after almost three decades of war.

The end of the conflict provides Sri Lanka with a unique opportunity to undertake economic reform and reconstruction, which would be key to laying the basis for high economic growth in the years ahead, the IMF said.