Last month Atkinson said she expected the loan of at least 1.9 billion US dollars to be approved within "weeks".

The loan had been delayed as it awaited approval from the US Treasury, which also consults other agencies, including the State Department, which is yet to approve the loan.

The US executive director votes on the loan after receiving a report from the international monetary affairs office of the Treasury. The US has to biggest share of votes in the IMF.

In March Sri Lanka floated the rupee as a prior action to the loan and the country's balance of payments has since turned.

Balance of payments crises are caused when a central bank sells foreign exchange to keep an exchange rate peg and prints domestic money at the same time, undermining the same objective.

The vicious cycle can rapidly deplete foreign reserves backing the local currency issue. Net foreign assets of Sri Lanka's central bank fell from about 3.0 billion dollars to 830 million US dollars during the peg defence period.

Declining foreign reserves makes investors jittery and can trigger capital flight, while rising interests can cause banking and economic crises.

A float breaks the dollar-selling and money printing cycle, and is the main tool behind an IMF program.

IMF cash go directly into the Central Bank balance sheet and has no effect on the domestic economy, though the funds boost reserves instilling "confidence". Ironically, for a central bank committed to a flexible exchange rate, reserves are no longer needed.

Central Bank governor Nivard Cabraal has said the IMF loan was no longer urgent.

Following the float in late March Sri Lanka's central bank has been able to boost reserves, buying 378 million US dollars and the government has also repaid a 125 million US dollar commercial loan this month.

On Friday, a 50 million US dollar bond offer was oversubscribed and the government raised 115.8 million US dollars.

The debt office said 190 million US dollars had also flowed into rupee treasuries in the past 10 weeks.

In May, Sri Lanka defeated Tamil Tiger separatists, renewing optimism about the country. The key remaining concern is government spending, which has been rising.

Even before the war flared in 1983, Sri Lanka's economy has been hit by excessive low quality state spending, which was financed by printed money which put inflation up, or borrowings, which has raised interest rates.