Cash-strapped Sri Lanka said Wednesday it had clinched a restructuring deal with key bilateral lenders covering up to $5.8 billion in debt, a key step towards recovery after a 2022 financial crash.

The agreement is hoped to allow Sri Lanka to allocate funds to essential public services and secure concessional financing for development.

The country defaulted on its foreign debt in April 2022 after running out of foreign exchange, and the unprecedented economic crisis forced then president Gotabaya Rajapaksa to step down.

On Wednesday, President Ranil Wickremesinghe's office said in a statement that the South Asian island had reached a deal with creditors.

"Sri Lanka reached a final restructuring agreement for $ 5.8 billion of debt with its bilateral lenders' Official Creditor Committee (OCC) in Paris, France," the statement read, without giving further details.

The Paris-based OCC includes members France, India and Japan.

China, the nation's largest single bilateral lender, is not a member, but Sri Lankan officials involved in the talks said Colombo hoped to also conclude a similar deal with Beijing.

The deal is a key condition of a bailout from the International Monetary Fund.

Earlier this month, the IMF provided the latest tranche of $336 million out of a $2.9 billion rescue package, designed to help repair Colombo's ruined finances over four years.

Bilateral creditors account for 28.5 percent of Sri Lanka's outstanding foreign debt of $37 billion, according to treasury data from the end of March.

China accounts for $4.66 billion of a total of $10.58 billion borrowed from other countries.

Japan accounts for $2.35 billion and India for $1.36 billion.

Sri Lanka's commercial borrowings include $12.55 billion raised through International Sovereign Bonds (ISB), and another $2.18 billion from the China Development Bank.

Wickremesinghe is due to address the nation later Wednesday, when he is expected to give details of the deal.

Sri Lanka is due to hold a presidential election this year and opposition parties have vowed to renegotiate the terms of the IMF bailout.

The IMF's Sri Lanka mission chief Peter Breuer said the fund was willing to listen to alternative proposals from rival political parties, but said it was necessary to stick with the benchmarks set in the bailout.

Sri Lanka had made good progress, but the country was not out of the woods yet, he said.