A key party in Sri Lanka's ruling coalition has quit in protest at government plans for a tsunami aid deal with the Tamil Tiger rebels.
President Chandrika has put her credibility on the line
The Sinhala-nationalist People's Liberation Front (JVP) left the coalition after an ultimatum for the government to stop the plan expired.
Analysts say the government will survive without the JVP but only as a vulnerable minority administration.
The JVP fears the aid agreement could help efforts to set up a Tamil state.
The key opposition United National Party has said it will not attempt to topple the government.
The BBC's Dumeetha Luthra in Colombo says President Chandrika Kumaratunga has put her political credibility on the line over the plan to disburse $2bn in pledged aid, which is backed by the international donor community.
But violent demonstrations over the past few days have highlighted the unpopularity of the deal.
Nearly 31,000 people were killed when the tsunami struck Sri Lanka's coast on 26 December. Half a million were made homeless.
The JVP has 39 seats in Sri Lanka's 225-member parliament, enough to deprive President Kumaratunga's government of its working majority by withdrawing.
The JVP had given the government until midnight (1900 GMT on Wednesday) to call off the aid plan, but the government did not back down.
"We leave with a sense of deep regret of work not
completed," Peoples Liberation Front chief Somawansa Amerasinghe told journalists in Colombo.
President Kumaratunga has said the proposed aid mechanism is purely an administrative tool to share out money.
Last month she said an aid-sharing deal with the Tamil Tigers could also help "open many doors to a final peace".
A ceasefire between the rebels and the government came into effect in February 2002, but peace talks ground to a halt in April of the following year.