According to an IMF report, Sri Lanka is facing a clear solvency problem.

According to the International Monetary Fund staff, Sri Lanka faces "solvency" issues as a result of risks associated with unsustainable debt levels that jeopardize the country's economy.

"Based on staff analysis, the fiscal consolidation required to reduce debt to safe levels would necessitate excessive adjustment over the coming years, indicating a clear solvency problem," the IMF said in its Article IV consultation report, which was released Friday in Washington.

The full report delves deeper into the debt and finances of the South Asian island nation. According to a summary of the report released earlier this month, Sri Lanka faced unsustainable debt levels and required a "credible and coherent" strategy to restore stability.

According to the report, the country's "debt overhang," as well as persistent fiscal and balance-of-payments shortfalls, "will constrain growth and jeopardize macroeconomic stability in both the near and medium term."

"Rollover risk is very high," according to the IMF. "Foreign exchange debt service needs of $7 billion per year will necessitate access to very large amounts of external financing at concessional rates and long maturities sustained over many years."

Since the IMF board considered the staff report in late February, a rise in oil prices and a loss of tourists due to the war in Ukraine have exacerbated the country's foreign exchange crisis, forcing President Gotabaya Rajapaksa's government to seek IMF assistance. Negotiations on a possible aid package are expected to begin in April, when President Mahinda Rajapaksa's brother, Finance Minister Basil Rajapaksa, travels to Washington.

The country has also raised interest rates, devalued its currency, and reduced non-essential imports as a result of the escalating crisis.

According to Bloomberg calculations based on central bank data, Sri Lanka has about $2 billion in reserves against $3.9 billion in foreign-currency debt due for the rest of 2022. This includes $1 billion in sovereign bonds that will mature in July.

"With the government indicating a desire for closer engagement with the IMF, the Central Bank of Sri Lanka stands ready to participate in such an engagement," the monetary authority said in an amended statement Saturday.

Sri Lanka must be "prepared to manage the negatives," central bank Governor Ajith Nivard Cabraal said on Thursday, referring to the possibility of entering an IMF program but not going into further detail.