COLOMBO (Reuters) -- Re-elected President Mahinda Rajapaksa will dissolve parliament shortly and call a legislative election, his office said on Thursday, in a move that could enable him to reshape the unwieldly coalition now backing him.
Rajapaksa won a thumping victory on Tuesday over his former army commander, General Sarath Fonseka, in the Indian Ocean island's first nationwide election since the defeat of the separatist Tamil Tigers.
Rajapaksa had sought a new mandate to endorse his plans to develop Sri Lanka by exploiting its geographically strategic position astride air and sea lanes, rebuilding infrastructure and encouraging foreign investment and local productivity.
"(The) President is to dissolve parliament and go for a general election soon," presidential spokesman Lucien Rajakarunanayake said.
He declined to say precisely when the president would dissolve parliament, which is due to end its term in April.
As president, Rajapaksa holds the reins of a $40 billion economy that has enjoyed a partial peace dividend, and is on the path to recovery with big Chinese and Indian investments into infrastructure and plans to put $4 billion into development.
Development of local industry, business and agriculture are what Rajapaksa says will be the key to healing Sri Lanka's divisions, by building a national identity and reconnecting the formerly Tiger-held areas to the rest of the country.
Disproving forecasts that Rajapaksa and former general Fonseka would race to a photo finish, the veteran politician won 57.8 percent of 10.4 million votes cast against 40.2 for Fonseka.
The Colombo Stock Exchange, which dipped 2 percent in early Thursday trading, closed up 1.28 percent at a fresh record high. It rose 125 percent in 2009, as post-war optimism made it one of the year's best performers.
DEFEATED RIVAL CRIES FOUL
Fonseka has cried foul over alleged vote rigging and what he said was an attempt to arrest him after army soldiers surrounded the luxury hotel where he was staying in the capital Colombo. The military said he may have been planning a coup.
"Only stupid people like them want to plan a coup in a hotel close to the president's house. We are not fools like them,," Fonseka told reporters. He complained his security detail had been removed.
The military said his security had been withdrawn because he was no longer a presidential candidate, meaning he was no longer entitled to it.
Fonseka walked out of the hotel unhindered on Wednesday evening and vowed to challenge the results in court, but few expect that to get far given the president's huge victory margin.
Mangala Smaraweera, an opposition legislator who engineered Fonseka's candidacy, said ballots that used to be rigged by force were now rigged by "showing money to counting agents."
The United States in a statement praised the conduct of the election, which many feared would be violent after a bloody campaign in which five people died. Observers noted few irregularities, and no major violence.
The U.S. statement cited a few violations and urged they be investigated but congratulated Sri Lanka for turnout that exceeded 70 percent and the president for his win.
Banking that his post-war popularity would secure him a new six-year term, Rajapaksa gambled and called the election two years before his term was set to expire.
Aides say the president wants to reconfigure his coalition, which has produced a cabinet with more than 100 ministers and has in the past kept him from achieving some of his political goals.
One area where Rajapaksa has been criticized for lack of progress is political reconciliation with the Tamil ethnic minority since the war's end. The president said on Wednesday night he would begin that process after the parliamentary poll.
(Additional reporting by Shihar Aneez; Writing by Bryson Hull; Editing by Jerry Norton and Ron Popeski)