Thousands cross lagoon to flee Sri Lanka fighting

By C. Bryson Hull and Ranga Sirilal

COLOMBO (Reuters) - Thousands of civilians under rebel fire waded across a lagoon on Thursday to escape Sri Lanka's war zone, where government forces have surrounded Tamil Tiger separatists for the final battle of a 25-year conflict, the military and a U.N. official said.

The military said aerial surveillance footage confirmed an exodus of around 5,000 people from a tiny, sandy coastal strip, where the United States and others say the Liberation Tigers of Tamil Eelam (LTTE) are holding thousands by force.

Sri Lanka and the LTTE brushed off demands from the U.N. Security Council and U.S. President Barack Obama to take steps to protect the civilians, who are stuck between two foes determined to fight to the end of a war that began in 1983.

Piling on more pressure, U.S. Secretary of State Hillary Clinton sought to dissuade the International Monetary Fund from considering a $1.9 billion loan for Sri Lanka.

"We think it is not an appropriate time to consider that until there is a resolution of this conflict and that is what we are focused on," Clinton told reporters in Washington.

But increased pressure from the United Nations and Washington appeared to have come too late to stop an exodus the military has been counting on to clear the way for a onslaught of overwhelming force against the LITE.

"Already, 2,000 civilians have crossed the lagoon. There is a large number of people crossing, and the (rebels) fired at them, Four people were killed, 14 were wounded," said military spokesman Brigadier Udaya Nanayakkara.

By evening, there were 2,700 people checked and cleared and at least another 1,000 waiting, although darkness had made it difficult to tell, he said.