With the date for the Sri Lankan Presidential polls finally announced, the favourite, Mahinda Rajapakse, got his campaign off to a flying start this week with a major rally organised by his Sinhala right wing allies.

Flanked by hardline Marxists and Buddhist monks in saffron robes, the Sri Lankan Prime Minister made his election pitch on Tuesday to a sea of red flags, apparently unconcerned by an internal rift within his party.

He told tens of thousands of supporters he would help the poor and seal peace with the Tamil Tigers without giving in to separatist demands, Reuters reported.

“My responsibility is to eradicate poverty ... safeguard the motherland ... and bring peace back to the country,” said Rajapakse, who like his right-of-centre election rival Ranil Wickremesinghe of the United National Party (UNP), is campaigning on a ticket of peace and economic prosperity.

Sri Lanka’s Election Commissioner, Dayananda Dissanayake, announced Monday that the Presidential election will be held on November 17, with nominations to close on October 7.

Despite speculation of friction with Chandrika Kumaratunga, outgoing President and leader of his Sri Lanka Freedom Party (SLFP) leader, Mr. Rajapakse seemed relaxed and upbeat at the rally, laughing with Somawamsa Amarasinghe leader of the ultra-nationalist-cum-Marxist Janatha Vimukthi Perumana (JVP), the third force in Sinhala politics.

JVP Propaganda Secretary Wimal Weerawansa told the rally Mr. Rajapakse would win the biggest victory ever won by any presidential candidate.

JVP Leader Somawansa Amerasinghe said the election on November 17 would be a battle between the camps representing the friends and enemies of the nation.

He said the leader of the enemy camp had been clearly identified as Mr. Wickremesinghe as he would help those who wanted to divide the nation, in reference to the UNP leaders efforts to pursue peace with the LTTE.

“Those who do not want to be part of that sin [dividing the country] and those who oppose Wickremesinghe but dislike voting for Rajapakse should either refrain from voting or destroy their votes. That would be a great service to the nation,” Mr. Amerasinghe was quoted by the Daily Mirror as saying.

Rajapakse, who has signed hardline nationalist agreements with the JVP and the Sinhala-Buddhist monks’ party, the Jathika Hela Urumaya (JHU), must contend with a rift with Kumaratunga, whose family, the Bandaranaikes, have led the SLFP since its founding.

Kumaratunga and her brother, Foreign Minister Anura Bandaranaike, have both openly criticised Rajapakse’s pacts with the JVP and JHU, saying he had breached party discipline by not seeking prior permission and that the agreements betrayed party ideals.

The JVP has, however allied with the SLFP under Kumaratunga’s leadership, including an fourteen month period from April 2004. The JVP quit in disgust at Kumaratunga’s buckling to international pressure for an aid-sharing deal with the Liberation Tigers.

Despite intense speculation that Kumaratunga, who was away in New York last week for the UN summit, would on her return this week take action against Rajapakse, possibly including his removal as party candidate.

Indeed, as Rajapakse’s campaign began in earnest, Kumaratunga’s camp backed away from a confrontation that seemed inevitable only days ago after the President and her brother slammed the Premier’s electoral alliances.

“There is a distinction in outlook on some conflict resolution parameters. That will be sorted out in the (party) manifesto,” Presidential spokesman Harim Peiris told Reuters this week, playing down the rift and dismissing the prospect that Kumaratunga could revoke Rajapakse’s nomination.

Whilst Mr. Rajapakse has taken a stridently Sinhala nationalist line – one that is already reaping visible benefits – his rival, Wickremesinghe has been trying to avoid alienating Sri Lanka’s minority communities.

It remains very much to be seen whether Mr. Rajapakse’s hardline polices will translate into minority support for him.

LTTE, which will not participate in the voting, does not plan to rally the minority Tamil community for or against either candidate.

“Both have victory as their objective and want to use the conflict of the Tamil people for their advantage - one wants to bash Tamils and get the (majority) Sinhala vote while the other wants to be seen as a moderate and win the minority vote,” LTTE Political Wing head, Mr. S. P. Thamilselvan told Reuters.

“The executive presidency has not helped the Tamil people in the northeast and therefore our interest in the outcome of the election is minimal,” he said.

However, the decision by the Tamil National Alliance (TNA), a coalition of Sri Lanka’s four largest Tamil parties, not to field a candidate of its own is expected to strengthen Mr. Wickremesinghe against his rival.

As will Thamilselvan’s observation that “our reading is that Mr Rajapakse is entering pacts with groups and people who have professed Tamil bashing openly and have extreme positions when it comes to the peace process.”

Apart from the JVP and JHU, Mr. Rajapakse has secured the support of five more parties in addition to the nine parties who are constituent parties of the ruling United People’s Freedom Alliance (UPFA), state media claimed this week. The paramilitary Eelam People’s Democratic Party (EPDP) is amongst them.

Intense horse trading is underway with other minority parties, which are expected to announce their positions in the coming days.

The upcountry Ceylon Workers Congress (CWC), whose leader, Arumugam Thondaman, had accompanied President Kumaratunga to New York has reportedly drafted a nineteen point agreement that he wants one of the candidates to adopt before he will extend his backing. Apart from ministerial perks for his party officials, Thondaman is also seeking diplomatic postings, political correspondents say.

The Sri Lanka Muslim Congress (SLMC) has said that enter into an agreement to solve problems which are inherent to the Muslim community would get its support. SLMC leader Rauff Hakeem says he will back the candidate less likely to yield to the LTTE, suggesting a retreat from Mr. Wickremesinghe.

But Mr. Hakeem also says he is concerned about the self-administrative rights of the Muslim community, appearing to put him at odds with Mr. Rajapakse, whose pact with the JHU dismisses out of hand the notion of powersharing or self rule with minorities.

Although the SLMC is nominally the largest Muslim party it is riven by an internal rebellion, with three out of four MPs reportedly with Rajapakse, as is the National Unity Alliance (NUA), a party which split earlier from the SLMC.

Meanwhile monitors have been invited to attend the polls and comment on whether the elections are free and fair. Election Commissioner Dissanayake has invited the European Union, the Commonwealth Secretariat and the United Nations to send members to monitor the elections.

After announcing the date for the polls, the Elections Commissioner also ordered the police to remove all cutouts, and posters, which are illegal during the campaigning period under Sri Lanka law.

Over 13 million registered voters are eligible to vote in the election to appoint the country’s fifth executive president since the powerful executive presidency was created through the constitution adopted in 1978.

The main international players supporting Sri Lanka’s peace process have warned that the Norwegian initiative faces “its most serious challenge” since the February 2002 cease-fire brought a halt to fighting between the government and the Liberation Tigers.

The warning was issued in a joint statement from the European Union, Japan, the United States, Britain and Norway - the Co-Chairs of the Tokyo Donor Conference of June 2003 that financially underwrote the peace process – who met Monday in New York.

The Co-Chairs rapped both the LTTE and the Sri Lanka government by implication for the serious situation and urged both parties to “engage constructively” with a Norwegian special representative, Major General Furuhovde, scheduled to visit the island in October “to find practical ways of improving implementation” of the truce.

Talks are deadlocked amid disagreements over the venue. Sri Lanka wants talks within territory controlled by its military, but the LTTE, citing security concerns, wants talks in a neutral foreign location. The Co-Chairs said they were disappointed with the LTTE did not agree to a Norwegian proposal to hold talks at Colombo airport.

While the Co-Chairs stopped short of directly accusing the Tigers of killing of Sri Lankan Foreign Minister Lakshman Kadirgamar last month, it strongly hinted that the LTTE was responsible in the view of the Co-Chairs.

The assassination was branded an “unconscionable act of terrorism” that casts “profound doubts on the commitment of those responsible to a peaceful and political resolution of the conflict.”

The Co-Chairs demanded that the LTTE take “immediate public steps to demonstrate their commitment to the peace process and their willingness to change.” They also called for “an immediate end to political assassinations by the LTTE and an end to LTTE recruitment of child soldiers” as “two such steps.”

The Sri Lanka government was criticised for not disarming paramilitaries said to be operating with the support of the armed force. However, Colombo was commended for its “restraint” following Kadirgamar’s assassination of.

The Co-Chairs said they “deplore the activities of paramilitary groups, which fuel the cycle of violence and unrest and … underscore the responsibility of the Sri Lankan government under the Ceasefire Agreement to disarm or relocate these groups from the north and east.”

The LTTE says the Sri Lankan military is backing five Tamil paramilitary groups, including one led by a renegade LTTE commander, Karuna, in a ‘shadow war’ against its cadres and supporters.

Colombo denies the charge, but international ceasefire monitors have recently met paramilitary leaders in Army-controlled areas.

“The Ceasefire Agreement remains the essential anchor of the peace process and is put at grave risk by the continuing violence. Effective implementation of the agreement is the responsibility of the Government of Sri Lanka and the LTTE,” the Co-Chairs said.

The statement, one of the most comprehensive issued in recent times, said that Sri Lanka’s forthcoming presidential election would naturally promote vigorous debate on the best way to advance the peace process and in this context called on all parties to refrain from violence and from making statements that could undermine the peace process.

The Co-Chairs reiterated that “a peaceful resolution of the conflict can only be achieved through a negotiated political settlement that follows the principles agreed in Oslo in December 2002 to explore a solution based on a federal model within a united Sri Lanka, and which ensures democracy and full respect for human rights and the legitimate rights of all ethnic groups.”

The favourite of the two-candidate Presidential race, Prime Minister Mahinda Rajapakse of the ruling Sri Lanka Freedom Party (SLFP), has entered into electoral alliances with two ultra-nationalist Sinhala parties, committing himself to a unitary state and rejecting autonomy, including federalism as a solution.

The Co-Chairs’ meeting Monday was hosted by Mr. Vidar Helegesen, State Secretary, Norwegian Ministry of Foreign Affairs and attended by EU Commissioner Mrs. Benita Ferrero-Waldner, Special Representative, Ministry of Foreign Affairs of Japan Mr. Yasushi Akashi, US Assistant Secretary of State for South Asia Mrs. Christina Rocca, and Mr. Tom Philips, Director South Asia and Afghanistan with Britain’s Foreign Office.

Having already agreed to condemn terrorism, leaders at the U.N. General Assembly urged quick adoption of a comprehensive global treaty that would put the words into action.

But one issue in particular is causing trouble - how to define terrorism amid concern independence struggles would be targeted.

A British-sponsored resolution accepted unanimously by the Security Council on the sidelines of the U.N. summit last week called upon all states to prohibit and prevent terrorism and deny a safe haven to anyone considered guilty of such conduct.

But delegates stressed the need for a broader convention that would serve as a framework for governments to work together to curtail international terrorism.

“The fight against terrorism must be continued in the most decisive manner,” Russian Foreign Minister Sergey Lavrov told the assembly.

Kazakhstan’s Foreign Minister Kasimzhomart Tokaev also called for the early completion of a comprehensive convention on terrorism.

He warned that poverty breeds extremism and that “young people are increasingly being sucked into the ideological orbit of international terrorism.”

Last week’s U.N. summit ended with world leaders adopting a watered-down document committing them to efforts to fight poverty, human rights abuses and terrorism.

The declaration put leaders on record for the first time as condemning “terrorism in all its forms and manifestations, committed by whomever, wherever and for whatever purpose ...”

But it failed to include a definition of terrorism that rules out attacks on civilians, as U.N. Secretary-General Kofi Annan had recommended.

Nonetheless, Annan said it was an important first step.

“You must build on that simple statement to complete a comprehensive convention against terrorism in the year ahead and forge a global counterterrorism strategy that weakens terrorists,” he told the assembly on Saturday. “We can do it and we must do it.”

The definition of terrorism has long stymied the United Nations and provoked bitter diplomatic disputes as some countries feared it would implicate those involved in independence struggles.

Washington also asked that the summit document make clear that it didn’t encompass military activities.

British Foreign Secretary Jack Straw, whose country suffered deadly attacks on its transit system in July, said the ratification of a comprehensive convention on terrorism was a high priority.

“None of us is safe from the threat of terror,” he told the assembly. “International terrorism requires an international response; otherwise we all pay the price for each other’s vulnerabilities.”

The United States also called for a strong commitment to completing the broader treaty.

“No cause, no movement and no grievance can justify the intentional killing of innocent civilians and noncombatants,” Secretary of State Condoleezza Rice told delegates on Saturday.

Brazil’s Foreign Minister Celso Amorim stressed the importance of protecting civil and political liberties.

“The fight against terrorism cannot be viewed in terms of police repression alone,” he said. “Neither can such repressive acts result in absurd, indiscriminate deaths, similar to those caused by terrorism itself.”

There has been a significant increase in search operations and the harassment of civilians by Sri Lanka’s security forces in and around the Northwestern town of Mannar, according to local community organizations. Residents have complained that Mannar has turned into a ‘garrison town’ with increases in arbitrary detentions, road blocks, cordon and search operations and the blockade of essential items.

The Mannar Citizens’ Committee (MCC) last Friday complained to the local Government Agent of the district that their town has become heavily militarized with the deployment of several hundred additional government troops and establishment of new checkpoints and sentries. Civilians are harassed by troops at roadblocks, it said.

After 10 pm Sri Lankan troops routinely enter the premises of private residences in the town, scaling over the boundary walls and creating panic among the occupants. Even the residence of Tamil National Alliance (TNA) MP Mr Vino Noharathalingam was searched on Thursday by the Sri Lankan military. The TNA is a coalition of Sri Lanka’s four main Tamil parties. It is a closely allied to the Liberation Tigers’ of Tamil Eelam (LTTE).

Selvam Adaikalanathan, TNA parliamentarian for Vanni, said that rising tensions are an inevitable consequence of escalating threats and harassment of district residents by SLA soldiers.

Soldiers conduct cordon and search operation in the middle of night directing the occupants to come out of their houses. Residents are experiencing untold hardships and are forced to spend sleepless nights, the MCC told the GA.

The security forces also increased surveillance of the Mannar district by establishing several roadblocks and sentry points in several key roads and junctions in the town’s environs. Residents of complained of the increasing roadblocks and the severe body checks passing through newly set up roadblocks and checkpoints. The soldiers said the increase in checks were as a result of direct orders from Colombo.

Apart from searches of homes and persons at checkpoints, arrests and detentions of residents have also increased dramatically in the recent months.

Last month, fifteen Tamil girls were arrested in a combined search operation conducted by the Sri Lanka Navy, Army and Police in the village of Thullukuddiruppu in Mannar district. They were later released. The police said they had been arrested on ‘wrong information’ received by the Navy. The girls were not produced in court.

A fourteen year old boy and a local man were also arrested in two separate incidents last month. No reasons were given.

Recollections of past abuse by Sri Lanka’s security forces fuels the sense of fear and anxiety amongst the local population amid heightened activity by the military

The girls’ arrests, for example, came on the same day that three Sri Lankan police officers and nine soldiers of the Sri Lanka Navy are indicted in the Anuradhapura High Court for the rape and torture of two Tamil women Sivamani Weerakone and Wijakala Nanthan of Uppukulam, a suburb of Mannar town four years ago.

Oone of the two women complainants in the rape incident, Ms Ehambaram Wijakala, was this week reported to be missing and the other, Ms Sinnathamby Sivamani, has received threats that she will be killed if she gives evidence in Anuradhapura.

A blockade on essential items has also been implemented on parts of Mannar. On August 31, Sri Lanka Police arrested two employees of Talaimannar Village Fisheries Co-operative Society with 2100 liters of fuel, which was taken in a society lorry to be supplied to member-fishermen. The police said they had not “obtained permission from the relevant authorities” to transport fuel. The fuel was confiscated.

But Talaimannar Village Fisheries Co-operative Society supplies fuel to about eighty-five fishing boats in the area on daily basis. About 250 fisher families live in the village. With the confiscation of 2100 liters of fuel, the society is struggling to supply their members fishermen to ply their trade in the Mannar Sea.

Goods are also being restricted from entering LTTE held areas. Construction work on new buildings in two schools in the LTTE controlled areas of the Mannar district has come to a halt due to the ban imposed by the Army on the transportation of building materials through Uyilankulam and Madu road army checkpoints.

The reconstruction works of the two schools, Palampiddy Government Tamil School and Thadchanamaruthamadu Government Tamil School in the LTTE held areas began in March this year with the financial allocation of Asian Development bank (ADB) funded North East Community Restoration Project (NECORD). The NECORD allocated about 2.7 million rupees each for the reconstruction of these schools.

Contractors who undertook to construct these new building first attempted to transport building materials through the Uyilankulam army checkpoint. Soldiers manning the checkpoint refused to allow the building materials through their checkpoint.

Community groups met with the international ceasefire monitors of the Sri Lanka Monitoring Mission (SLMM) last week to complain about the rising harassment and interference by the Sri Lankan security forces.

They also appealed to the appealed to the SLMM to take steps to ensure the return of LTTE political cadres withdrawn from government controlled areas and to provide necessary support in enabling the LTTE to recommence political activities.

The LTTE withdrew their political cadres in the region after attacks by suspected paramilitary organizations associated with the Sri Lankan military and the increasing harassment of political cadres by Sri Lanka’s security forces.

Tamils in Mannar district are anxious over the withdrawal of LTTE political cadres, local residents told reporters. The local LTTE offices provided a point of support amidst harrasment by the security forces as the cadres there could readily access the SLMM, they said.

Compiled from TamilNet reports

Tens of thousands of residents of the Mullaitivu district converged on the Malathi Sports Ground in Puthukudiyiruppu on September 14 to express their support for self-determination and to appeal to the international community to recognize their right to greater autonomy from Colombo.

The ‘Tamil Resurgence’ event in Mullaitivu is the fourth in a recent series of public gatherings for Tamils of Sri Lanka’s Northeast express their political sentiments. Previous events held in Kilinochchi, Vavuniya and Batticaloa, drew large crowds, some in excess of a hundred thousand people.

Increasing frustrations following the Sri Lankan state’s obstruction of the implementation of the Post-Tsunami Operational Management Structure (P-TOMS) have resulted in public frustrations and given fresh impetus to demands for greater Tamil self rule.

The ruling by a Sri Lankan court two months ago impeding the implementation of the aid distribution agreement between the Sri Lankan government and the Liberation Tigers of Tamil Eelam have reaffirmed Tamil sentiments that they cannot continue to be vulnerable on Colombo’s whim.

Tamils from all walks of life including academics, politicians and religious dignitaries lent their support to the various declarations made at the forum. Reflecting another popular sentiment, one of the handbills issued at the event called on the International Community to support Tamil self rule.

“Extend your moral support achieve self rule with just peace and dignity in our traditional homeland. Help us to live in our homeland with Self Rule in peace with the Sinhala South,” the declaration said. “Peace, Reconciliation and Co-existance are norms set and insisted upon by the International Community. We respect these norms. We Tamils too aspire for same.”

The declaration, which included elemetns of the Vavuniya rally’s statement, called upon the international community to exert their influence on Sri Lanka to allow the Tamils to have greater self-rule without the resumption of the war.

Since the February 2002 ceasefire, residents of the Northeast have been able to use public demonstrations as a means of expressing political opinions supporting the Tamil Tigers, without fear of a backlash from the Sri Lankan state.

Similar political events have been held in different parts of the Northeast in the past two months. Kilinochchi, the administrative capital of the Vanni region in Northern Sri Lanka saw another huge demonstration on September 1 by the region’s residents, appealing to the International community to recognize Tamils’ right to self-determination.

Over a hundred thousand people turned out in Kilinochchi to voice their support for the call for greater self-governance. “We, as Tamil people request the international community to recognize our just struggle for freedom with dignity,” said Bishop Dr. Jebanesan of the Church of South India, addressing the rally.

Speakers at rallies argue the residents of the North-East had lost confidence in the democratic rule of the Sri Lankan state after its transition to a mono-religious, mono-linguistic country, and the subsequent oppression of the minorities on the island.

A month before the Kilinochchi event, another rally took place in Batticaloa, despite a bombing by suspected Sri Lankan military-backed paramilitaries.

The district level conference at the grounds of Batticaloa Hindu College attracted thousands of participants from various parts of the districts, including academics, writers, religious dignitaries, representatives of civil organisations and politicians.

The first of the recent series of public events was held in Vavuniya in late July. The declaration of the event called for an environment to be created to enable Tamils to decide their own political destiny. It also demanded that occupying Sinhala forces must vacate with immediate effect homed and villages they are occupying in defiance of the February 2002 ceasefire.

That proclamation, like others, concluded urging the International Community to recognise the “basic rights and life of freedom with peace on the basis of our traditional homeland, our nationhood and self rule and struggle for sovereignty.”

Responding to Sri Lankan President Chandrika Kumaratunga’s speech last week at the United Nations where she accused the Liberation Tigers of not respecting the ceasefire agreement (CFA) and promised to implement a federal solution, the LTTE said this week it “is still ready for immediate talks on the implementation of the CFA, outside the island.”

“We see a lot of contradictions in the speeches of Sri Lankan President Chandrika Kumaratunga, made abroad and in the south,” Mr. S. P. Thamilchelvan, Political Head of the LTTE, told TamilNet in an exclusive interview Friday.

“The fact is the Tamil people have lost faith in Kumaratunga’s statements, speeches and promises. It is high time the international community takes this into consideration,” he said.

Mr. Thamilchelvan emphasised that the LTTE was ready for immediate talks on the implementation of the CFA provided they are held in an international venue, rather than in the insecure south of Sri Lanka.

While it had become the accepted practice to conduct talks outside the island, Kumaratunge government’s sudden insistence on having talks in Sri Lanka was to conjure a new ploy that would help scuttle the talks, he observed.

“We consider Kumaratunga’s speech in New York a pack of chicaneries trying to hoodwink the international community. During her ten-year period of presidency Kumaratunga failed to implement anything to enhance the welfare of the Tamil people,” Mr. Thamilchelvan said.

“It is ludicrous for Kumaratunga who is at the tail-end of her presidency to pontificate now that she is committed to a federal system for the resolution of the Tamil national question,” he also said.

The LTTE’s Political chief pointed out that Kumaratunga tried desperately to prevent the then United National Front (UNF) government from holding talks with the LTTE on the proposal of Interim Self Governing Authority (ISGA), which she vehemently criticized. At her earliest opportunity, she dismissed the UNF government, jeopardising the chance for the resumption of the peace talks centred on the ISGA proposals.

“She failed to take action using her executive power to solve the humanitarian problems of Tamil people when misery struck them. It was because of the international pressure that she signed the P-TOMS agreement with the LTTE. But she did not make any move to implement it.”

“She has now rushed to shift the blame for the non-implementation of the P-TOMS on to the Supreme Court and the Sinhala extreme nationalists. Hence we see no credibility in the speeches and statements made by her abroad. They ring hollow.”

“Even last year, when she went abroad, she spoke profusely in favour of a political solution based on federal concept, with a view to win the hearts of the international community. But once she returned to Sri Lanka, it became a forgotten tale,” he said.

Commenting on the reports that that Mr. Jayantha Dhanapala, the head of Sri Lanka’s Peace Secretariat, had requested Ms Christina Rocca, US Assistant Secretary of State that the international community should exert pressure on the LTTE to come to the negotiating table, Mr Thamilchelvan said, “southern politicians and diplomats are used to giving a picture of deceit to the international community regarding the problems affecting the Tamil people in Sri Lanka.”

Sri Lankan politicians and diplomats are now engaged in disrupting the good relations and understanding the LTTE has built up with several countries, he charged.

“We also consider the Sri Lankan government’s insistence on holding future peace talks in Sri Lanka and not abroad is with a view to sever the rapport the LTTE has built up with the international community,” Mr. Thamilchelvan added.

“The Sri Lankan government’s strategy is to marginalize the Tamil people and weakening the LTTE on one hand, while assuring the international community it is prepared to hold peace talks with the LTTE, on the other. Sri Lankan diplomats including Dr. Jayantha Dhanapala are now engaged in the implementation of this strategy of duplicity,” Mr. Thamilchelvan further said.

“If Sri Lanka is seriously committed to taking forward the peace process, it should have first agreed to hold talks on the implementation of the ceasefire agreement in a neutral country, without breaking the status quo, for which the LTTE is always ready,” Mr. Thamilchelvan assured.

“We have categorically informed the Norwegian government that the talks on the implementation of the ceasefire agreement should be held in a neutral country. But due to the pressure of the Sri Lankan government, probably from the President herself, the Norwegian government proposed Sri Lanka,” replied Mr. Thamilchelvan to a question from the correspondent.

“The Norwegian government did not impose on us its decision on a venue in Sri Lanka. We have now received news that Norwegian government is considering our proposal regarding venue for talks,” Mr. Thamilchelvan added.

“We have also pointed out to the Norwegian facilitators that the contradictory statements and speeches by President Kumaratunga who is on the verge of leaving her post are causing serious impediment to the peace process. We are sure the Norwegian authorities are quite aware of the development.”

The International Monetary Fund (IMF) has warned Sri Lanka that it is exceeding budget targets and urged tough measures to cut subsidies, especially on fuel, in order to salvage the economy.

Sri Lanka also badly needs to restructure public enterprises like the loss-making Ceylon Electricity Board and the Ceylon Petroleum Corporation, and revive a faltering peace process with the Liberation Tigers to lure investment, the lender added.

In a detailed report on the state of the island’s economy, the IMF said the government has overspent on subsidies while failing to collect expected tax revenues so far this year.

“Collections in several areas have fallen short of expectations, including excise tax and import duties,” it said in a 73-page report released last Thursday.

“On the expenditure side, subsidies for fuel have been considerably higher than budget provisions and 20 bln rupees (200m USD) has already been spent on tsunami relief.”

“The fiscal deficit exceeded budget targets, and with a significant amount of government financing provided by the central bank (outside the budget), the growth in monetary aggregates increased, contributing to higher inflation,” it added.

The IMF also said Sri Lanka’s central bank’s decision to hike interest rates by a quarter percentage point on Tuesday in a bid to slow galloping inflation was insufficient.

“In view of the prevailing high inflation, and continued high growth in monetary and credit aggregates, monetary policy should be tightened further,” the international lender warned.

It forecast inflation at 14 pct this year, up from 7.9 pct last year and 2.6 pct in 2003.

However, the IMF noted that the December 26 tsunami which killed over 31,000 people and left a million homeless had brought a respite to the economy by way of increased foreign aid and a freeze on some of its foreign debt.

Monitoring aid flows and ensuring accountability in their use will be a key priority in mobilising external financing for tsunami reconstruction, the IMF said.

“At the same time, fiscal policy will have to be implemented carefully to reduce demand pressures by taking steps to enhance revenue, reduce subsidies and cut back on development spending in lower priority areas,” the IMF said.

The country’s economic growth was projected at 5.3 pct, down from 5.4 pct in 2004 and 6.0 pct in 2003.

“There are several downside risks,” the IMF said. “The authorities will need to be prepared to take additional measures to meet fiscal objectives, including further adjustments in domestic fuel prices, which may prove politically difficult.”

But, with presidential elections pending the future of Sri Lanka’s economic policy is uncertain.

Ruling party candidate - and current Prime Minister - Mahinda Rajapakse has signed a pre-election deal with a powerful Marxist-cum-Sinhalese nationalist party, the JVP, in which he has pledged to halt privatisation if elected.

The IMF said that managing the economy in the near-term will be a challenge and warned that the policy slippage experienced in 2004 must be avoided.

The medium-term outlook hinges on the ability to move toward consolidation, reviving peace efforts and raising investment to levels comparable to its East Asian peers.

Diplomatic efforts to get the Colombo government and the Tamil Tigers back to the negotiating table remain deadlocked since April 2003.

“The medium-term outlook depends on Sri Lanka’s ability to move toward fiscal consolidation, implement structural reforms and revive the peace process,” the IMF said.

Sri Lanka’s all monk party, the Jathika Hela Urumaya (JHU), last week denied it was fundamentalist and insisted its pact with Premier Mahinda Rajapakse, which is steeped in Sinhala-Buddhist nationalism, “relates to issues common to all Sri Lankans.”

JHU President Ven. Ellawela Medananda Thera told The Sunday Times that the 12-point agreement between his party and Rajapakse, the candidate of the ruling Sri Lanka Freedom Party (SLFP) was drawn up by consultation between the two parties.

Asked why his party had signed the deal with Rajapakse, the monk said the Prime Minister’s view reflected those of his right wing party.

“We had talks with both the presidential candidates Ranil Wickremesinghe and Mahinda Rajapakse. Our main concern was the unitary status of the country. We were not satisfied with the manner in which Mr. Wickremesinghe said he would handle the issue.”

“We decided to support the Prime Minister because he had agreed to uphold the Constitution and act within its framework,” he said.

On being asked whether the LTTE would be willing to negotiate with a President who wins on the Sinhala-nationalist principles expressed in the agreement, the monk replied “that has to be handled in a clever manner using the proper tactics to force them to the negotiating table.”

The JHU leader said the international community should help in this regard. “There are many rich countries such as the United States, Britain, Canada, Australia and Norway from where the LTTE receives funds. They can stop this and ask the LTTE to come to the negotiating table. They have to stop nourishing the LTTE.”

Medananda Thera also told The Sunday Times that the LTTE would lose any conventional war and its strength had been over-estimated.

“Our people as well as our rulers are over- estimating the LTTE. Thanks to the foolish polices of our own leaders, they have managed to hole up in many parts of the country today,” he said.

“If the LTTE wages a conventional war with our armed forces, it would not have the strength to last even for half an hour. But they adopt dirty tactics and hide and attack. But the LTTE does not have the kind of strength they try to project.”

He was also clear on the need for the LTTE to disarm. “The question is not whether the LTTE will disarm or not. It must disarm.”

“There is no need to go back to war. If we take a tough stand, the war will be over,” he said, in statements reminiscent of Chandrika Kumaratunga’s 1994 call of ‘War for Peace’.

The Sunday Times questioned why the monks were willing to trust Rajapakse if they believed that it was the ‘foolish policies’ of past leaders that had led to the current situation, given that he has been in power for several years.

“We have looked at the person; spoken to the person and estimated that he has the strength to act according to his convictions. We will lend our support to him and see how he works,” said Medananda Thera.

The monks ruled out any form power sharing as a solution to the Tamil national question.

“Power has been devolved within the country to the maximum extent possible via the Provincial Councils and there was no room for further devolution. Any more devolution would tantamount to giving a separate state. This talk of more devolution is a fraud.”

The JHU-Rajapakse agreement says: “No racial group shall be granted self governance in any part of Sri Lankan territory… No part of the Sri Lankan land shall be considered as the homeland of any racial group.”

Peace facilitator Norway, instrumental in getting the 2002 ceasefire agreement, was condemned by the JHU leader as biased. However, the issue of the Norwegians was too insignificant to be included in the agreement.

“We do not accept Norway. It is a non entity for us. We do not recognise Norway and if we included them in this agreement that means we have given them some recognition,” he told the Sunday Times.

“They must be sent out of the country. They have worked fraudulently and in a manner that has harmed the unity of the country.”

Political analysts suggest that the JHU statements reflect an emerging polarisation in the Sinhala polity. As the race to be the next Sri Lankan President begins to heat up, the divergence between the hardliners who believe the peace process to date has only weakened Sri Lanka and the moderates who back the Norwegian mediated talks grows ever wider.