The country has been overpowered with months of lack of food, fuel, and medicine, extended power cuts, and inflation following a foreign exchange crisis that left importers unable to pay for vital goods and a turn of events with the island's President chased from the country and bankruptcy filed with mounting foreign debt. 

July witnessed huge protests in the country, and an angry crowd entered the official residence of then-President Gotabaya Rajapaksa, who as a result fled the island and issued his resignation from Singapore.

The International Monetary Fund (IMF) board will need to agree on Thursday's staff agreement, which depends on Sri Lanka finalizing a deal to restructure its $51 billion in foreign debt with creditors. The IMF has set a $2.9 billion bailout amount for the revival of the country's economy. 

In a statement after talks in the capital Colombo, the IMF stated that "Sri Lanka has been facing an acute crisis... disproportionately borne by the poor and vulnerable.... the objectives of Sri Lanka's new Fund-supported program are to restore macroeconomic stability and debt sustainability," adding that a "good faith agreement" with creditors alongside debt sustainability was considered crucial to be met before the lender provides the funds. 

The country's biggest bilateral lender, China, which accounts for approximately 10% of borrowings, confirmed it is ready to maintain close contact with Sri Lanka and "meet the challenges together," commenting that "we will together maintain a healthy and stable development of relations under our trade agreement [China-Ceylon Rice Rubber Pact signed in 1952]," according to the Chinese Commerce Ministry Spokesperson Shu Jueting.

According to IMF, Sri Lanka agreed to increase revenue and remove subsidies, while ensuring a flexible exchange rate and rebuilding its foreign reserves, which had hit rock bottom.

Price increases of 64.3% 

After his predecessor escaped, President Ranil Wickremesinghe announced additional tax increases and drastic reforms as part of efforts to bring debt under control, as his policies and government had already bumped up prices on fuel and electricity more than thrice and removed energy subsidies, a key pre-condition for the IMF bailout. 

Sri Lanka's unforeseen economic crisis began when the country ran out of foreign exchange to buy the goods and services needed to maintain its import-reliant economy running. 

Against the greenback this year, the Sri Lankan rupee has also lost more than 45% of its value. 

The coronavirus pandemic was a hard hit to the island's tourism industry, drying up foreign remittances from Sri Lankans working abroad who are both considered key foreign exchange earners and producers.

Rajapaksa's former government was condemned for introducing unsustainable tax cuts that bolstered government debt and aggravated the crisis, whereby inflation hit a monthly record in August with the country's main standard showing price average rises of 64.3%.