US secretary of state Hilary Clinton said in May that it was not an "appropriate time" to consider a loan to Sri Lanka.

But the US diplomat had told Sri Lanka's foreign secretary that the island was yet to submit a letter of intent to the IMF to apply for the loan.

The letter of intent has to be signed by Sri Lanka finance minister who is the country's current president and the central bank governor.

The letter is accompanied by a technical memorandum of understanding which sets out the IMF program in detail with monetary targets such as reserve money, foreign reserve floors and domestic asset ceilings as well as fiscal targets involving revenue and budget deficit.

The program is then submitted to the IMF's executive director for approval and comments.

The foreign ministry said the US diplomat had given an assurance that his country's representative along with others will "review and consider the loan on financial and economic criteria."

Sri Lanka officials say that the central bank has already exceeded monetary targets discussed in March.

However Sri Lanka's fiscal picture has deteriorated with revenues down 8.0 percent in the first five months.

Yesterday the government presented more 'supplementary estimates' to parliament to increase spending.

Officials say Sri Lanka will have now have to revise its technical memorandum with new fiscal data.

Sri Lankan politicians have slammed the US for bringing a 'political agenda' to IMF negotiations.

Relations between Sri Lanka took a turn for the worse after the Obama administration came to power over the treatment of civilians in the last stages of fighting with the Tamil Tiger separatists.

Sri Lanka floated the rupee in March as a prior action for the IMF loan, and has since escaped the balance of payments crisis worsened by a defence of a de facto peg with the US dollar.

The Central Bank had bought more than 450 million dollars from forex markets since the float and Central Bank Governor Nivard Cabraal has said the loan is no longer urgent but would like to have it as a buffer.

Gross foreign reserves are estimated to top 1.5 billion US dollars now.

In addition to fiscal liabilities Sri Lanka's state-run Ceylon Petroleum Corporation may be forced to pay more than 600 million dollars to foreign counterparties in petroleum derivatives which are now in arbitration.