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The International Monetary Fund (IMF) said it had not reached a staff-level agreement with Sri Lanka in its first review of the country's finances because of a potential deficit in generating government revenues. The review is being carried out as part of plans to release a $2.9 billion bailout package for Sri Lanka, Reuters reported.

Speaking after a two-week visit to the South Asian country, IMF delegation head Peter Breuer said the second tranche of about $330 million under the Sri Lanka programme would only be disbursed once the IMF reached a staff-level agreement with the country. There is currently no fixed timetable for when this will happen.

"Sri Lanka has made commendable progress in implementing difficult but much-needed reforms. These efforts bear fruit as the economy shows tentative signs of stabilisation," the fund said in a statement.

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"The team will continue its discussions in the context of the first review with the aim of reaching a staff-level agreement in the near future," the IMF added.

The IMF delegation also said that despite the first signs of stabilisation, full economic recovery is still not guaranteed and growth momentum remains weak.

Over the past six months, inflation in Sri Lanka has fallen, reaching 1.3 percent year-on-year in September. At the same time, the local currency rose by about 12 percent and the country's foreign exchange reserves improved.

Although revenue mobilisation has improved compared to last year, the IMF warned that revenue in Sri Lanka's budget is expected to be nearly 15 percent below initial forecasts by the end of the year.

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