The International Monetary Fund (IMF) on Saturday approved the three year $1.5 billion loan to Sri Lanka.

The loan is armed at averting the balance of payments crisis and supporting the economic reform agenda agreed with the IMF.

The decision by the IMF's executive board will allow an immediate amount of US $ 168.1 million, followed by six further installments, depending on quarterly reviews.

“A return to fiscal consolidation, targeting a reduction in the overall fiscal deficit to 3.5 percent of GDP by 2020, is the linchpin of the reform program," the deputing managing director and acting chair, Min Zhu said in a statement.

"Rebuilding tax revenues through a comprehensive reform of both tax policy and administration will be key in this regard, supplemented by steps toward more effective control over expenditures and putting state enterprise operations on a more commercial footing."

“Medium-term growth prospects also need to be supported through a greater role for market forces and a decisive shift toward an outward orientation. A clear commitment to exchange rate flexibility will enable adjustment to a shifting external environment while allowing the central bank to rebuild foreign exchange reserves and focus more closely on its key mandate of price stability."

"The economic program also supports the government’s objective of boosting competitiveness and greater integration with regional and global markets through comprehensive trade reform and improvements to the investment environment. Steadfast implementation of these reforms should strengthen Sri Lanka’s ability to attract investment, improve prospects for sustained medium-term growth, and reduce fiscal risks.”