By Uditha JayasingheCOLOMBO (Reuters) -The International Monetary Fund (IMF) approved the third review of Sri Lanka's $2.9 billion bailout on Saturday but warned that the South Asian economy remains vulnerable.

The International Monetary Fund (IMF) approved the third review of Sri Lanka's $2.9 billion bailout, releasing another $333 million. While economic recovery signs surface, the nation must finalize debt restructuring to continue progress.

IMF staff and the Sri Lankan authorities have reached staff-level agreement on economic policies to conclude the third review of Sri Lanka’s economic reform program supported by the IMF’s Extended Fun

Sri Lanka expects the IMF to announce a staff level agreement on its third review of the country's bailout programme on Friday, President Anura Kumara Dissanayake told the first sitting of the new parliament.

In a statement, the global lender said it would release about $333 million, bringing total funding to around $1.3 billion, to the crisis-hit nation. It said signs of an economic recovery were emerging.

The International Monetary Fund (IMF) approved the third review of Sri Lanka's $2.9 billion bailout on Saturday but warned that the South Asian economy remains vulnerable.

Sri Lanka's new leader on Thursday backed a controversial IMF bailout, marking a U-turn from his election pledge to renegotiate the deal secured by his predecessor.