Sri Lanka's disputed prime minister Mahinda Rajapaksa resigns

Sri Lanka's prime minister announced on Saturday that he would step aside, paving the way for his sacked predecessor to regain the position and end a political impasse that has paralysed the government and threatened civil unrest for the past seven weeks.

Mahinda Rajapaksa's resignation signals the end of turmoil that began in October when President Maithripala Sirisena triggered a constitutional crisis by abruptly sacked Ranil Wickremesinghe, and appointing Mr Rajapaksa as his replacement.

The country was facing the threat of a looming government shutdown with doubts surrounding its ability to repay $1.5 billion due to bond holders by January 10th without an effective administration in place.

Mr Rajapaksa held a multi-religious service at his home where he signed a letter backing down from the post of prime minister controversially conferred on him on October 26.

The 73-year-old ex-president vowed to make a comeback at local council elections.

"There is no doubt at all that the people who stood by us since 2015 will continue to support us in the future as well," he said addressing his close associates. "We will bring the forces opposed to the country down to their knees by organising the people."

His aides said he was returning a fleet of limousines he had used since his disputed appointment.

President Maithripala Sirisena triggered the political turmoil by sacking Mr Wickremesinghe.

But Mr Wickremesinghe refused to step down insisting that his sacking was illegal, leaving the Indian Ocean nation of 21 million people with two men claiming the premiership.

Mr Rajapaksa was then defeated in a no-confidence motion on November 14.

However, the following day, Speaker Karu Jayasuriya ruled that he would recognise neither man as prime minister, leaving Sri Lanka effectively without a government.

The country was left heading for a government shutdown as parliament failed to approve spending for 2019 and credit rating agencies downgraded its debt amid fears of a sovereign default.

Mr Rajapaksa's son Namal had announced on Friday that his father - who as president ended Sri Lanka's civil war in 2009 amid allegations of grave human rights abuses - was throwing in the towel "to ensure stability".