Page last updated at 03:38 GMT, Saturday, 25 July 2009 04:38 UK

IMF grants Sri Lanka $2.6bn loan

Sri Lanka displaced camp
Thousands of displaced civilians are still being held in detention camps

The International Monetary Fund has approved a $2.6bn (£1.6bn) loan to help Sri Lanka weather the global economic crisis and rebuild war-torn regions.

The first $322m tranche of the 20-month loan is available immediately, with the rest subject to quarterly reviews.

Britain and the US abstained from the vote, citing humanitarian concerns during the government's recent fighting against Tamil Tiger rebels.

Colombo says the money will be used to start the country's "healing process".

Sri Lanka's Enterprise Minister, Anura Priyadarshana Yapa, said the money would pay for post-war reconstruction work in the north and east of the island - areas previously controlled by the rebels.

"We have completely destroyed one of the worst terrorist outfits in the world and it is time to start the reconciling and healing process in our country," Mr Yapa told Reuters news agency on Friday.

Humanitarian concerns

The loan comes two months after the government crushed the Tamil Tiger rebels, ending Sri Lanka's bitter 37-year civil war.

The conflict has claimed up to 100,000 lives and left some 300,000 civilians displaced in the north of the country.

British Financial Secretary Stephen Timms said it was "not the right time for the programme".

In a letter to a special parliamentary group, Mr Timms said the UK wanted to "secure long-term peace and prosperity" for Sri Lanka through reconciliation between its communities.

Now that the loan has passed, Mr Timms said the UK would turn its attention to monitoring developments on the ground.

"We expect the government of Sri Lanka's commitment to reduce defence spending whilst safeguarding spending on humanitarian assistance and [the resettlement of displaced people] to be implemented in full," he told the PA news agency.

Sri Lanka approached the IMF regarding a loan in March, when its balance of payments fell into deficit for the first time in four years.

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