COLOMBO   -   Bankrupt Sri Lanka will re­ceive a conditional $2.9 bil­lion bailout to repair its battered finances, the Inter­national Monetary Fund said Thursday, following a bruis­ing economic crisis that saw the island nation’s president chased from the country.

Months of acute food, fuel and medicine shortages, ex­tended blackouts and run­away inflation have plagued the country after a foreign exchange crisis left importers unable to pay for vital goods.

Huge protests rocked the nation in July and an incensed crowd stormed the official residence of then-president Gotabaya Rajapaksa, with the leader later fleeing the island and issuing his resig­nation from Singapore. The IMF board will need to ratify Thursday’s staff agreement, which is conditional on Sri Lanka striking a deal with creditors to restructure its $51 billion in foreign debt. “Sri Lanka has been facing an acute crisis... disproportion­ately borne by the poor and vulnerable,” the IMF said in a statement after nine days of talks in the capital Colombo.

“The objectives of Sri Lan­ka’s new Fund-supported program are to restore mac­roeconomic stability and debt sustainability.” Debt sustain­ability and a “good faith agree­ment” with private creditors were necessary before the lender could provide support, the statement added. China -- the country’s biggest bilateral lender, accounting for around 10 percent of borrowings -- has so far not publicly shifted from its offer of issuing more loans instead of taking a hair­cut on existing credit.

The IMF said Sri Lanka had agreed to increase revenue, remove subsidies, ensure a flexible exchange rate and rebuild its foreign reserves, which had hit rock bot­tom. President Ranil Wick­remesinghe, who took office after his predecessor fled, this week announced further tax hikes and sweeping reforms as part of efforts to bring debt under control. His govern­ment had already raised pric­es on fuel and electricity more than threefold and removed energy subsidies, a key pre-condition for the IMF bailout. Sri Lanka’s unprecedented economic crisis began when the country ran out of for­eign exhange to buy the goods needed to keep its import-dependent economy running. 

The coronavirus pandemic was a hammer-blow to the island’s tourism industry and dried up foreign remittances from Sri Lankans working abroad -- both key foreign ex­change earners. Rajapaksa’s government was criticised for introducing unsustain­able tax cuts that drove up government debt and exacer­bated the crisis. Inflation hit a fresh monthly record in Au­gust with the country’s main benchmark showing price average rises of 64.3 percent. The Sri Lankan rupee has also lost more than 45 per­cent of its value against the greenback this year.