Sri Lanka denies IMF loan delay

Sri Lanka says it needs the loan to pay for post-war reconstruction

Sri Lanka has denied reports that a proposed loan from the International Monetary Fund (IMF) is being delayed by the US, officials say.

American officials said the move was aimed at putting pressure on Colombo to do more to help civilians caught up in the fighting in the north.

But a senior Sri Lankan official says the talks are on schedule.

Sri Lanka has been holding talks with the IMF for a loan of nearly a $2bn to weather the global economic crisis.

International concern

The Sri Lankan government has been under immense pressure from the international community to declare a temporary ceasefire with Tamil Tiger rebels to allow tens of thousands of civilians safely to leave the war zone in the north-east.

President Mahinda Rajapaksa has again ruled out a halt in the military offensive against Tamil Tiger rebels and says the West should not lecture him about it.

US officials - who did not want to be named - told the Reuters news agency that the Obama administration wanted the loan to be delayed because Sri Lanka had not done enough to protect civilians trapped in the fighting.

"This is completely wrong," KD Ranasinghe, acting director at the Sri Lankan Central Bank's economic research department said.

"There is no delay in the loan process. The negotiations have been finalised. The technical evaluations are over," he said.

His comments came a day after the visit of the British and French foreign ministers who demanded an immediate ceasefire and better humanitarian access for civilians trapped in the war zone.

Sri Lanka says it needs the IMF money to overcome the financial crisis and to pay for reconstruction work in the north and east of the island.

It has been hit by slowing tea and textile exports that have depleted the country's foreign currency reserves.

The Central Bank also believes that an IMF loan would encourage other institutions to offer monetary support and boost international investor confidence.