Sri Lankan government has confirmed an arrangement is being negotiated with Australia to tackle people-smuggling.

Minister for Media, Keheliya Rambukwella, told journalists in Colombo on Saturday the deal was a memorandum of understanding between the two navies.

“There is an arrangement, an MOU to be signed between the two naval forces,” the minister said.

“All the details have been discussed and once it is signed it will be made a public document.”

Australian Prime Minister Tony Abbott, in Colombo for the Commonwealth Heads of Government Meeting, will meet with President Mahinda Rajapaksa later on Saturday with people-smuggling set to be on the agenda.

Foreign Minister Julie Bishop is understood to have discussed the new strategy with her Sri Lankan counterpart when she was attending a meeting of Commonwealth foreign ministers in Colombo this week.

The coalition took to the federal election a policy of intercepting all identified asylum seeker vessels travelling from Sri Lanka outside the Australian sea border and arranging for the immediate return of all passengers.

The key to the policy is ensuring what have been described as “safe transfer arrangements” involving the Sri Lankan government.

Mr Abbott told reporters in Colombo on Friday that Australia had “good and close co-operation” with the Sri Lankan government and navy.

“I’ll be thanking the Sri Lankans for the co-operation which they have extended to us on this important issue and I will have more to say about this in the next day or so,” Mr Abbott said. - AAP