The IMF approved the $1.5 billion loan in June 2016 following a balance of payments crisis in Sri Lanka.
With this latest tranche it has released a total of $760 million.
While noting the progress on reducing Sri Lanka's deficit, the fund said more progress will be needed, including on tax collection and beefing up foreign reserves.
"It is important to build on the progress made and accelerate reforms to further reduce fiscal and external vulnerabilities," Deputy Managing Director Mitsuhiro Furusawa said in a statement.
He pointed to the country's high debt burden and the weak performance of state-owned enterprises, as well as the need for the central bank to continue to lean towards raising interest rates as long as inflation remains a threat.