The New York-based rights group has voiced concern that Sri Lanka is holding 280,000 people displaced by the fighting in camps and failing to investigate attacks on journalists and civil society groups.

'Rewarding bad behaviour'

Brad Adams, the Asia director of Human Rights Watch, called the loan "a reward for bad behaviour, not an incentive to improve".

But Sri Lankan police insist that investigations are ongoing and the government has vowed to resettle 80 per cent of the displaced people by the end of this year.

Some $322.2m of the loan will be immediately available to Sri Lanka while the balance will be distributed in phases, subject to quarterly review, the IMF said in a statement.

The money will go towards reconstruction but will also be used to help support Sri Lanka through the global economic crisis.

"The global financial crisis has had a significant impact on Sri Lanka's economy,"  Takatoshi Kato, the IMF deputy managing director and acting chairman of the board, said.

"The government's ambitious programme, supported by the IMF, intends to restore fiscal and external viability and address the significant reconstruction needs of the conflict-affected areas, thereby laying the basis for future higher economic growth," he said.

Five board members including the US and Britain, abstained from the vote over concerns about the government's human rights record.