A key Muslim party in Sri Lanka's ruling coalition has withdrawn an ultimatum to the government to scrap a tsunami aid-sharing deal with Tamil rebels.

The National Unity Alliance party, which had given the government until Tuesday to abandon the deal, now says it will remain in the coalition.

The party also urges the government to ensure that the aid-sharing deal does not hurt the Muslim community.

Under the announced deal, the Colombo government and Tamil rebels will jointly handle billions of dollars in foreign aid for survivors of the December 26 tsunami that killed 31,000 and displaced one million people in Sri Lanka.

Most of the destruction was in the embattled north and east, much of which is dominated by Tamil rebels. But Muslims say more than half the victims were from their community and, therefore, should have a greater voice in aid distribution.

Some information for this report provided by AP and AFP.