Sri Lanka's president presented the impoverished country's largest-ever defense budget to parliament while a fierce battle raged between troops and Tamil separatists in the country's north, the military said.
The sprawling fight erupted early on Wednesday when Tamil Tiger separatists attacked government positions along the front lines at Muhamalai in the Jaffna Peninsula, just north of rebel-held territory, the military said in a statement.
The military said 52 rebels and 11 soldiers were killed and 41 soldiers were injured.
However, rebel spokesman Rasiah Ilanthirayan said in an e-mailed statement that the insurgents repelled a military offensive, killing 20 soldiers and losing one rebel fighter.
"In the end of the two hour confrontation, the SLA [Sri Lanka Army] troops retreated to their earlier posts with heavy casualties," he said.
The two sides often give widely divergent death tolls, exaggerating their enemies' casualties while undercounting their own. No independent confirmation of the fighting was available.
Hours after the battle, Sri Lankan President Mahinda Rajapaksa, who also serves as defense and finance minister, asked parliament for a 20 percent increase in defense spending, bringing it to 166.4 billion rupees (US$1.5 billion) from 139 billion rupees last year.
Senior government officials have said they plan to launch a major offensive in the coming months against the Tamil Tigers' mini-state in the north in an effort to destroy the rebel group.
"We have no alternative but to completely eradicate terrorism," Rajapaksa told parliament in a nearly two-hour speech broadcast on national television.
Other fighting announced on Wednesday killed five rebels along the front lines, the military said.
Rajapaksa's budget is expected to face sharp debate over the next two weeks. If it fails to pass, the government could fall, forcing new elections.
The total government expenditure for next year is estimated at 1 trillion rupees far in excess of expected revenues of 751 billion rupees.
In July, the government declared it had ousted the rebels from the east.
However, the rebels -- who still control a wide swath of territory in the north -- continue to carry out attacks against the military. A massive rebel assault two weeks ago on an air base destroyed eight aircraft.
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