A five-judge bench headed by Chief Justice Sarath Silva ruled that Kumaratunga's second term will end on December 22, upholding a plea from Opposition parties that the next presidential election should be held this year.

Kumaratunga, first elected in August 1994, called a snap poll a year early in 1999 and won a second six-year term that will end this December.

However, she argued that the leftover year from her first term should mean she could stay in power until late 2006.

Even an hour before the court ruling, Kumaratunga's office issued a statement indicating that she expected to retire in 2006 and not this year. Her office said in a statement that she turned down a pension, but accepted the gift of a large piece of state land to build her retirement home.

She will construct her private residence "after retirement from the presidency in 2006," the statement said. Kumaratunga will not be able to stand as the Constitution limits presidents to two terms.

However, political sources said Kumaratunga could now dissolve Parliament and call a snap parliamentary election ahead of the presidential poll. A legislative election is seen as being more favourable for Kumaratunga's shaky minority government which may not be able to have the government's annual budget for 2006 approved at a vote in November.