The International Monetary Fund had constructive and productive discussions with the Sri Lankan authorities on economic policies and reforms to be supported by an IMF extended fund facility arrangement, it said in a release today.

The statement boosts hopes that the crisis-hit country can put its public finances in order and reassure creditors.

"The discussions will continue virtually with a view to reaching a staff-level agreement on the EFF arrangement in the near term," IMF said.

The island of 22 million people is facing its worst financial crisis in decades, which has left it struggling to pay for essential imports and forced it to default on some foreign debt.