By Shihar Aneez

COLOMBO, July 2 (Reuters) - Sri Lanka's foreign currency reserves have risen by over 23 percent in two months as funds flowed into the country after the end of its long war against the Tamil Tigers, the central bank governor said on Thursday.

Sri Lanka in March sought a $1.9 billion International Monetary Fund (IMF) loan to avert a balance of payments crisis, after spending half its reserves defending the rupee and paying foreign investors who sold off treasury securities after the global downturn.

But with the loan's approval tied up in political wrangling after the end of a 25-year war with the Tamil Tigers on May 18, the central bank has said the urgency for it is declining.

'The reserves are now at over $1.6 billion as of today and it is enough to finance more than two months of imports,' Ajith Nivard Cabraal, the central bank governor, told Reuters.

The reserves were $1.3 billion at end-April, central bank data showed. The central bank said on June 16 it had mopped up $367 million from the market since May.

Traders say it has been buying dollars at 114.90 rupees since the government declared victory in May in the 25-year civil war. That has kept the rupee from appreciating despite upward pressure from remittances, donor funds, and foreign buying of government securities.

'In the absence of the IMF loan, rising reserves would give confidence to the market and it will also reduce pressure on speculative rupee trading,' said Chirantha Caldera, a currency dealer at Commercial Bank of Ceylon.

Cabraal said the IMF has given personal assurances the loan would come through but declined to say when. The central bank has repeatedly given predictions that have not been borne out.

Sri Lanka has blamed Western nations for delaying the loan to punish the island nation after it refused their calls to slow the final offensive and beat back moves to launch international probes into possible war crimes by both sides.

Western diplomats say Sri Lanka has not signed a letter of intent, essential before the IMF board can consider the loan.

That process is where political considerations could come into play, even though the IMF is supposed to decide solely on economic reasons. The IMF has had no comment on the delay.

(Editing by Bryson Hull) (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) Keywords: SRILANKA ECONOMY/RESERVES

(shihar.aneez@reuters.com; +94-773-763-577; Reuters messaging; shihar.aneez.reuters.com@reuters.net)

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