COLOMBO - Sri Lankan shares closed higher for a third straight session on Tuesday, moving further away from a near seven-year closing low hit last week, as local investors bought beaten-down stocks.

** Traders, however, said sectarian violence still weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people.

** The International Monetary Fund (IMF) on May 14 approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion. ** Sri Lanka's economy should still grow 3.5% this year and there has not been a revision yet, the IMF added on Thursday. 

** Sri Lanka's economic growth is expected to slump to its lowest in nearly two decades this year, a Reuters poll showed last week. Tourism, foreign investment and overall business activity have all dropped after the bombings. 

** The benchmark stock index .CSE ended 0.6% firmer on Tuesday at 5,291.28. It fell 1.28% last week. The markets were closed on Monday for a special holiday. ** Turnover was 330.6 million rupees ($1.88 million), well below this year's daily average of around 562.6 million rupees. Last year's daily average was 834 million rupees.

** Foreign investors sold a net 43.4 million rupees worth of shares on Tuesday, extending the year-to-date net foreign outflow to 5.8 billion rupees worth of equities. ** The rupee ended at 176.25/40 per dollar, weaker than Friday's close of 175.90/176.10, market sources said.

** Analysts expect the currency to weaken as money flows out of stocks and government securities.

** The rupee gained 0.1% this week and is up 3.9% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia.

** Foreign investors sold a net 433.2 million rupees worth of government securities in the week ended May 15, extending net foreign outflow to 21.2 billion rupees so far this year, central bank data showed.

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds.

($1 = 176.0000 Sri Lankan rupees)

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu) ((mailto:ranga.sirilal@thomsonreuters.com; +94-11-232-5540; Reuters Messaging: ranga.sirilal.thomsonreuters.com@reuters.net ; www.twitter.com/rangaba))