Sri Lanka's president said on Tuesday that China had agreed to restructure its loans to the bankrupt island nation, clearing the final obstacle to a long-awaited International Monetary Fund bailout.

An unprecedented economic crisis has seen Sri Lanka's 22 million people suffer acute food, fuel and medicine shortages, along with extended blackouts and runaway inflation.

President Ranil Wickremesinghe's government has been working to repair Sri Lanka's ruined finances and secure the sorely needed IMF rescue package.

But it was held up by debt negotiations with China, its largest bilateral creditor.

Wickremesinghe told parliament Beijing had now agreed to a restructuring and that he expected the first tranche from the Washington-based lender's promised US$2.9 billion in funds to be released within the month.

"We have done our part, I hope the IMF will do theirs," he said in a special address to lawmakers.

Wickremesinghe said the state-owned Exim Bank of China had sent a letter to the IMF on Monday night signalling its willingness to go ahead with a restructuring.

"Sri Lanka has now received financing assurances from all major bilateral creditors," said Krishna Srinivasan, director of the IMF's Asia and Pacific Department.

This paves the way for the fund's board to approve a loan earlier agreed upon by its staff.

"Approval by the board would also catalyze financing from other creditors, including the World Bank and the Asian Development Bank," he said.

The arrangement will help authorities' programme of ambitious reforms to aid Sri Lanka in emerging from its current crisis, he added.

Sri Lanka defaulted on its US$46 billion foreign debt last April. (AFP)