The International Monetary Fund says it has reached a staff-level agreement with Sri Lanka that could lead to the release of about 330 million dollars in funding.

The South Asian country is battling to recover from the worst economic crisis in its history. Last year it suspended debt repayments to international creditors, effectively putting it in default.

In March, the IMF and Sri Lanka agreed on a four-year bailout program worth about 3 billion dollars.

The 330 million dollars would be the second tranche released under the financing arrangement. It follows the first review of the program by an IMF team.

The agreement announced Thursday still needs to be approved by the fund's board.

The IMF said Sri Lanka's macroeconomic policy reforms has started to bear fruit and the economy is showing ''tentative signs of stabilization.'' It added that sustaining the reform momentum is critical.