A bomb in the north-east of the ethnically divided island killed 13 bus passengers and wounded 16 others, including children, the military said.

A similar bomb attack in the south on a military vehicle killed one soldier. Three other soldiers escaped with injuries.

The attacks, both blamed on the Tigers, came hours after an annual military parade at Colombo's seaside Galle Face promenade to mark Sri Lanka's 60th anniversary of independence from Britain.

Kicking off the parade, held under stiff security, President Mahinda Rajapakse also brushed off threats of foreign aid cuts due to the worsening ethnic conflict and human rights situation.

He said the 'challenge bestowed upon us by history is the defeat of terrorism', and asserted that government forces had cornered the rebels in the northern part of the island.

'Terrorism is receiving an unprecedented defeat,' said Mr Rajapakse.

Many roads throughout the capital, Colombo, were sealed and one of Sri Lanka's main cellular phone providers shut off its text messaging service for six hours as top government officials and thousands of ordinary Sri Lankans gathered for the Independence Day celebrations.

The Sri Lankan navy also stepped up patrols to prevent seaborne attacks by the Sea Tigers, the Tamil Tigers' naval unit, and air defence systems were on alert amid fears of attacks by the rebels' light aircraft.

Two hours before the ceremonies got under way here, suspected Tiger rebels set off a bomb and destroyed an electricity transformer at a suburb of Colombo, police said, but there were no casualties.

They said a more powerful bomb was found and defused hours earlier in the same area.

The continued fighting, as well as mounting international concern over the human rights situation, has led to threats of cuts in foreign aid.

Mr Rajapakse, however, appeared to brush off such warnings by asserting that Sri Lanka has 'established new relations with our neighbouring states, Arab states, and Buddhist states'.

His remarks followed a thinly veiled warning from Japan, the island's main financial backer, that it may review its aid policy unless there was a decline in the level of violence.

The United States and Britain last year announced aid cuts to the island, citing human rights violations and high defence spending by the government. The US has also stopped selling military hardware to Colombo.

AGENCE FRANCE-PRESSE