President Kumaratunga put troops at key facilities

By the close on Wednesday, 24 hours after President Chandrika Kumaratunga sacked three key ministers and suspended parliament, the Colombo all-share index was down almost 13% at 1,161.29 amid what traders called "panic-mode" selling.

The fall was the biggest ever for the market, which till Tuesday had been one of the best-performing in the world on a 70% gain this year.

Analysts said the crisis could threaten $4.5bn in aid promised to aid reconstruction, as well as private investment.

It also directly threatens the budget, which was due to be put before parliament on 12 November.

Investors have been piling into Sri Lanka on hopes of a permanent end to two decades of conflict between government forces and Tamil separatists.

But Ms Kumaratunga and Prime Minister Ranil Wickremasinghe come from opposing parties, and the President has long accused his cabinet of selling out.

The Prime Minister and President do not see eye to eye

Her complaints have become increasingly voluble, leading to attempts to force the ousting of the head of the Norwegian team trying to mediate the peace process.

Stuttering progress

Although talks have run into the sand on numerous occasions, investors have tended to believe the momentum for continuing the process would overcome the President's attempts to sabotage it.

After years of stagnation, growth was expected to hit 6% this year, and although the trade gap is widening, exports are beginning to accelerate.

Tourists too are flooding back to Sri Lanka, putting behind them the bombing of the only international airport in 2001.