The Reserve Bank of India (RBI) last week signed an agreement with the Central Bank of Sri Lanka which will enable the latter to withdraw up to $400mn in US Dollars or Euros.

"The Central Bank of Sri Lanka can make drawals of US Dollar or Euro in multiple tranches up to a maximum of USD 400 million or its equivalent," RBI said in a statement.

The agreement will be valid for three years and is expected to further economic co-operation between the two countries, the statement said, adding that it will also further financial stability in the region.

The National Freedom Front (NFF) accused Sri Lankan president Maithripala Sirisena of working against the mandate of the United People’s Freedom Alliance (UPFA) coalition and attempting to move the country towards federalism.

“We have always worked towards protecting the unity and sovereignty of the country,” said NFF spokesman Mohammed Muzammil in comments to the Sunday Leader. “President Maithripala Sirisena walked out of the UPFA and worked against it,” he added.

Sri Lanka’s Prime Minister Ranil Wickremesinghe pledged to deliver a political solution for the Tamil people, during his three-day visit to Jaffna.

Meeting with TNA officials on Saturday, the prime minister is said to have assured them that solutions to problems faced by the people in the region will be found.

However, addressing the Sri Lankan military at the Palali army camp, in the midst of a vast militarised high security zone, he said Sri Lanka should enhance its military force.

Sri Lanka already possesses one of the largest army's in the world, in relation to its population size, and the militarisation of the North-East is one of the key grievances of the Tamil people.

The Sri Lankan government has warned there is a real danger of the Liberation Tigers of Tamil Eelam regrouping and orchestrating another conflict.

Speaking to media earlier today, Deputy Foreign Minister Ajith Perera said the LTTE had millions of dollars in foreign assets that could be used to fund another guerrilla war at home.

“Their front organisations operate businesses abroad, they run petrol stations, supermarkets and have shipping companies,” the minister told reporters in Colombo.

“Even though they have been defeated on the ground, there is a real danger of their trying to regroup.”

Sri Lanka’s police claims the Tamil documentary film makers arrested in Colombo for making a “defamatory film” were working for Channel 4.

According to The Island, the police said the film was shot in Tamil in South India and some sections involving soldiers had been dubbed in Sinhala.

The Sri Lankan government has decided to resume all road development projects with China, according to a government official.

Highways, Higher Education and Investment Promotion Ministry Secretary Udaya Ranjith Seneviratne told Xinhua that the ministry had already made payments to the relevant Chinese contractors for the projects.

Some of the Chinese companies involved in the projects had earlier decided to suspend some of the work due to non-payment.

Tamil activists who take part in protests highlight the disappearances of those who surrendered to the army, are under surveillance by the Terrorism Investigation Department and complain of harassment by the security forces.

S Yogeswari (name changed), whose husband was in the political wing of the LTTE and disappeared after surrendered to the army on May 18, 2009, told the New Indian Express that she lives in fear due to close surveillance.

She has been taking part in the recent demonstrations highlighting the disappearance of LTTE members who had surrendered to the army.

“Because I participate in these demonstrations, teams of investigators, including those from the Terrorist Investigation Department (TID), frequently visit me. When they come in the evenings, my kids and I get frightened,” the 45-year-old mother of three said.