A report on state radio that elusive Tamil Tiger leader Velupillai Prabhakaran and his intelligence chief Pottu Amman are among the dead or missing due to the tsunami infuriated the rebels, who dismissed it as "gossip mongering and malicious propaganda".

Tension between the Liberation Tigers of Tamil Eelam (LTTE) and the government had already been ratcheted up after the rebels Wednesday accused the security forces of preventing private donations from getting to temporary shelters holding tsunami survivors in their zones -- claims the government denied.

The UN said it had decided to steer clear of controversy by not scheduling any LTTE areas on the secretary general's programme Saturday.

"The rebels want (Annan) to visit their areas and have been pressing for it through various channels, but we are playing safe," a UN source told AFP.

When asked whether he planned to visit any of the northern regions of the island held by the LTTE, Annan said he was a guest of the government.

"I will go where the government and the UN officials agree. I am on a humanitarian visit and am concerned about everyone with need."

Instead, he flew over the devastated southern Galle district before landing at the eastern town of Hambantota.

"This is a beautiful country but I am sorry for the people who suffered this destruction. (The UN) will try to reconstruct it as much as possible," Annan said on landing by helicopter in the wave-battered town.

He was met in Hambanota by Sri Lankan Prime Minister Mahinda Rajapakse and World Bank  president James Wolfensohn.

Thousands of locals gathered in the streets to greet them as they toured the town and made a number of stops, including at the Galwella Buddhist temple followed by the nearby Tabeer Jumma mosque where 80 tsunami-affected Muslim, Hindu and Christian families are housed.

"We came to listen and learn today, Mr. Wolfensohn and I ... and that is what we did," Annan said.

Before departing for Trincomalee, another devastated eastern coastal district, Annan told reporters that the United Nations Development Programme (UNDP) would open a temporary office at Hambantota to oversee relief work.

At an emergency summit of world leaders in Jakarta on Thursday, Annan said donors must stump up 977 million dollars of immediate cash relief to help those affected by the tsunamis or face a possible second wave of carnage as disease loomed.

The UN chief arrived in Colombo Friday as US Secretary of State Colin Powell  was leaving the island after completing a day-long tour.

Since Thursday's summit in Jakarta, a slew of world figures have descended on ravaged Sri Lanka, among them World Health Organisation (WHO) director general Lee Jong-Wook.

Lee told a media conference in Colombo Saturday the health of Sri Lankan tsunami survivors is under control but the tragedy has been a major setback for the public health sector on the island.

While there had been an increase in diarrhoea cases in some of the affected areas in Sri Lanka, Lee said, "that is to be expected.

"It is quite normal after a catastrophe of this magnitude because of a shortage of quality water and the lack of sanitation facilities," he said. "But there is not any new epidemic."

Sri Lanka country representative Kan Tun told reporters the WHO had managed to contain severe outbreaks of diarrhoea, malaria and dengue fever.