A radical Marxist party said today it had struck a deal to form an interim coalition with Sri Lanka's embattled minority government.
A source close to the People's Liberation Front (JVP) said the party had reached an agreement in principle in talks late last night to set up an interim government for up to one year with President Chandrika Kumaratunga's People's Alliance.
Kumaratunga's party lost its majority in June when it broke with a key ally.
The government has agreed to cancel a referendum, summon parliament on or before September 7 and set up four of the five commissions, the official said.
The JVP, which is against economic reforms and a Norwegian bid to end the country's 18-year ethnic war, has 10 seats in the 225-member parliament and the People's Alliance has 109.
The agreement still has to be approved by the People's Alliance's parliamentary members, the official said.
Kumaratunga suspended parliament in July ahead of a no-confidence vote and said she would hold a referendum on planned constitutional reforms. The plebiscite has already been postponed once until October 18.
Opposition parties have been calling on the government to set up independent commissions on elections, the civil service, police, the judiciary and the state media.
The official said an agreement had been reached on all of the commissions except the state media one.
The talks with the JVP took place after government meetings with the main opposition United National Party (UNP) broke down earlier this week.
The UNP had made similar demands but had also made clear that any coalition deal would have it take over the reigns of government while the JVP has indicated it was willing to share power with Kumaratunga.
The JVP has also said in the past it wants the government to impose price controls, roll back privatisation of state assets and freeze a Norwegian-brokered bid to open talks with separatist Tamil Tiger rebels.
The government announced on Wednesday it was considering a new initiative to end the conflict that has left an estimated 64,000 dead.
The economic policies of the JVP, architect of two Marxist insurgencies which killed more than 80,000 in the past 30 years, also run counter to reforms the International Monetary Fund has said are needed if aid is to continue flowing to Sri Lanka.