Sri Lanka's forex situation has "improved" and the economy has started to see favourable results due to decisions made by the Central Bank to mitigate the country's economic crisis, Central Bank Governor Nandalal Weerasinghe said on Thursday.

Sri Lanka is in the midst of an unprecedented economic crisis that has led to severe shortages of fuel and other essentials.

"The forex situation has improved now. We have been able to pay for essentials such as petrol, diesel and medicine," Weerasinghe said, adding that while the imports expenditure had decreased the exports had increased.

The Governor said that it was feared that inflation would rise to more than 70 per cent. "But now we see it won't go high even with the current hike in electricity rates. We are hopeful it will come down," he said.

He, however, added that the current inflation which hover around 60 per cent needs improving.

Sri Lanka owes USD 51 billion in foreign debt, of which USD 28 billion must be paid by 2027.

The country's inflation surged to 60.8 per cent in July, up from 54.6 per cent in June, the crisis-hit country's statistics department Colombo Consumer Price Index has said, as food and fuel remained scarce amid dwindling foreign exchange reserves.

The island nation of 22 million also witnessed a major political churn in recent times following massive mass protests that forced former president Gotabaya Rajapaksa to flee the country and resign from his post.

Weerasinghe also said that a delegation of the IMF will visit later this month which he said would lead to the staff level agreement needed for a bailout package sought by Sri Lanka. We have achieved our policy level targets so we hope to reach staff level agreement. This will certainly improve our position," he said.

On debt restructuring, a prerequisite for the IMF facility, Weerasinghe said, "All creditors will be officially approached and we will present our overall macro programme that has been approved by the IMF."

Weerasinghe also said the Lankan economy would contract by 8 per cent over the earlier projection of 7.5 per cent negative growth.

In July, Rajapaksa's ally and Sri Lanka's newly-appointed president Ranil Wickremesinghe said he had aimed to reach an agreement with the IMF by early August, but the political turmoil in the country forced the international lender to push back the agreement by a month.