The second review of Sri Lanka's $2.9 billion bailout with the IMF could be completed in the first half of 2024, provided it manages to meet debt restructuring and revenue targets set under the programme, an official said on Wednesday.

The International Monetary Fund (IMF) said its executive board cleared the first review of Sri Lanka's $2.9 billion bailout on Tuesday, providing about $337 million in funds to help tackle the fallout from the country's worst financial crisis in decades.

The South Asian island nation is recovering from its worst financial crisis since its independence in 1948 that sent the economy into freefall last year with soaring inflation, currency depreciation and low foreign reserves.

The total amount sent so far to Sri Lanka now stands at about $670 million, according to the IMF.

An IMF delegation will travel to Sri Lanka in March and the second review could be finalised about two months afterwards, Peter Breuer, senior mission chief for Sri Lanka, told an online press briefing in Washington.

Sri Lanka will need to reach agreements with its official creditors which include China, Japan and India, as well as a resolution with external private creditors to restructure its foreign debt before finalising the review.

"We are projecting that next year there will be positive growth. So, I think there are signs that all these reforms are paying off but clearly the economy is not yet out of the woods, a lot more reforms need to happen (and) sustaining this reform momentum is really key for the economy to safely emerge from the crisis," he said.

Sri Lanka's economy, which began to stabilise after the bailout was secured in March, will contract by 3.6% this year. The country is likely to grow by 1.8% in 2024 as economic expansion gains pace, Breuer added.

Sri Lanka needs to raise its tax revenue, reform loss making state enterprises and build stronger reserves to stay on the IMF programme path.

China would not need to join the Official Creditor Committee (OCC) co-chaired by Japan and India as the core part of the debt restructuring was completed, Breuer said.

China is Sri Lanka's largest bilateral creditor and reached an agreement in principle to rework about $4.2 billion of China EXIM Bank debt in October.

Sri Lanka's sovereign dollar bonds were all trading higher on the day after the island nation cleared the first review under its IMF bailout programme.

The bonds were trading between 49.1 to 50.4 cents in the dollar, Tradeweb data showed. Shorter-dated notes including and gained more than the longer-dated ones.