US Assistant Secretary of State for South and Central Asian affairs, Richard Boucher, said Washington will strengthen military ties with Sri Lanka but was concerned that the Indian Ocean island was moving towards hostilities.

"It is important to be clear that the purpose of our assistance is not to encourage a return to war," Boucher said after talks with President Mahinda Rajapakse.

"We firmly believe that there is no military solution to Sri Lanka's ethnic conflict," he said. "Rather, our assistance is meant to help Sri Lanka deter a return to war."

He said the US gifting an ageing coast guard cutter was a symbol of its commitment to stand with the Colombo government in its opposition to the separatist Liberation Tigers of Tamil Eelam (LTTE).

The US outlawed the Tiger rebels in October 1997 and urged the European Union to follow suit, which the 25-member European block did on Monday, effectively cutting off international funding for the guerrillas.

The rebels are accused of extorting money from some Tamils living abroad.

Boucher said there would be more military cooperation in terms of providing training and equipment to Sri Lankan security forces, but did not elaborate on the security-related ties.

"We will continue to be involved in a tangible way (in military and security cooperation) with the people of Sri Lanka, the government of Sri Lanka and all communities of Sri Lanka," Boucher told reporters here.