Cash-strapped Sri Lanka must begin debt restructuring talks with its creditors, including China before it can hope of getting the bailout package sanctioned from the IMF, the Washington-based lender has said.

The island nation of 22 million is in the midst of an unprecedented economic crisis that has led to severe shortages of fuel and other essentials.

“Sri Lanka had a balance of payment crisis. The foreign exchange reserves ran dry and there was nothing they could use to pay for basic necessities and pharmaceuticals and energy,” International Monetary Fund Chief Economist Pierre-Olivier Gourinchas said on Wednesday, while responding to questions on Twitter Space.

Gourinchas said that the IMF is deeply concerned about the economic situation in Sri Lanka and is looking forward to working with the new government headed by President Ranil Wickremesinghe.

"Sri Lanka needs to reach a debt restructuring agreement with creditors, including China before an agreement can be reached between the IMF and the Sri Lankan Government," he explained.

“We are deeply concerned about the impact the crisis is having, especially on poor and vulnerable groups. We have seen the reports. We have seen the difficulties they are facing,” he added.

Sri Lanka owes China USD 6.5 billion in financing, including a credit bank swap and development bank loans, according to data from the Institute of International Finance

Earlier this month, IMF Managing Director Kristalina Georgieva said it hopes to complete the negotiations with Sri Lanka on a bailout package "as quickly as possible" and the "moment there is a government" in the country.

Last week, Sri Lanka's Parliament elected Ranil Wickremesinghe, an ally of Rajapaksa, as Gotabaya Rajapaksa's successor, who resigned after fleeing to Singapore.

Sri Lanka needs about USD 5 billion in the next six months to cover basic necessities for its 22 million people, who have been struggling with long queues, worsening shortages and power cuts.

The country's inflation topped 50 per cent in June after two years of money printing and an attempted float botched with a surrender requirement, which sent the rupee sliding to 360 to the US dollar from 200.