(Reuters) – A member of parliament in Sri Lanka said on Wednesday he believed President Mahinda Rajapaksa would soon order the release from prison of the country’s former army chief Sarath Fonseka, revered by many of his compatriots for helping end a 25-year civil war.

The jailing of General Fonseka has prompted criticism in Western countries and his release would be seen as a step towards addressing concerns over human rights abuses. The United States has repeatedly called for the release of the general, who challenged Rajapaksa in the 2010 presidential election.

COLOMBO (AFP): Sri Lankan authorities are mulling a pardon for jailed former army chief and defeated presidential candidate Sarath Fonseka amid international calls for his release, an official said Tuesday.

President Mahinda Rajapakse was likely to consider freeing Fonseka who is serving two jail terms over two separate cases — one ordered by a military court martial and one by a civilian court, an official close to the president said.

* Investors believe ex-army chief’s release could ease intl pressure on the country

* Retailers buy. Large, institutional investors stay on sidelines

* Rupee flat; excess liquidity due to cen bank buying bonds

COLOMBO, May 16 (Reuters) – Sri Lanka’s stock market climbed more than 2 percent on Wednesday to a one-week high as retail investors snapped up hotel and diversified shares on the hope that President Mahinda Rajapaksa would soon order the release from prison of the former army chief and prompt more foreign inflows to the market.

Apparel exports from Sri Lanka may witness a slowdown this year owing to financial crisis and political changes in the eurozone.

The South Asian country’s total exports may not reach the target of US$ 11.9 billion in 2012, as more than 60 percent of Sri Lankan export earnings are from garments, Ajith Nivard Cabraal, the Governor of Central Bank, said.

* Sri Lanka May monetary policy rate decision
* Friday, May 11 at 1800 hours. (1230 GMT

(Reuters) Sri Lanka's central bank is expected to keep key policy rates
steady on Friday after raising them twice since February.
    A Reuters poll of 14 analysts showed repurchase and reverse
repurchase rates are expected to be held steady at 7.75 percent
9.75 percent respectively. The rates are at their highest level
in more than two and half years.