The Fund had been due to release an instalment in October when President Maithripala Sirisena sacked his Prime Minister and called fresh elections, triggering a two month power struggle in the island nation
The International Monetary Fund on Friday revived a $1.5 billion bailout for Sri Lanka that was suspended over a government power struggle last year that seriously slowed economic growth.
The Washington-based lender said officials visiting Colombo agreed to re-activate the three-year loan, which started in 2016 and spread the instalments over an additional year.
"The team reached understandings at the staff level with the Sri Lankan authorities... to allow more time for the completion of the economic reform agenda," the IMF said.
The Fund had been due to release an instalment in October when President Maithripala Sirisena sacked his Prime Minister and called fresh elections, triggering a two month power struggle in the island nation.
Because of the crisis, the economy grew by just 3% last year, making it the slowest expansion in 17 years, according to the Central Bank of Sri Lanka. The IMF said it expected Sri Lanka's growth to improve to 3.5% in 2019.
Sri Lanka's Supreme Court eventually held that Sirisena's actons were unconstitutional, allowing Premier Ranil Wickremesinghe to resume his duties.
Wickremesinghe told parliament in January that his dismissal on October 26 was a "coup" and a "death blow" to the economy.
During the crisis, three international credit rating agencies downgraded the country's debt and the extra borrowing costs forced Sri Lanka to abandon plans to raise loans abroad.
But the IMF noted that Sri Lanka's economy was "gradually stabilising after the weak economic performance in 2018, in the context of external shocks and domestic political uncertainty."
"At this difficult juncture, a concerted effort is needed by all stakeholders to preserve the hard-won gains."
Official figures show that Sri Lanka will have to repay a record $5.9 billion in foreign loans in 2019.
One of the biggest drags on the balance sheet is national carrier Sri Lankan Airlines, which has accumulated losses and debts of over $2 billion.
The government has failed to privatise the airline, but the president has revived attempts to find a partner who could inject new capital to keep the airline afloat.