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War's refugees engulf Sri Lanka. THOUSANDS FLEEING

Sri Lanka is struggling with the largest wave of refugees in its four-year civil war. Only a month ago, after India and Sri Lanka signed a peace accord aimed at ending the conflict, the country was taking steps to get back on its feet. People were leaving shelters and returning home. Houses were being rebuilt. Schools were reopening. For many, hardships seemed to have eased.

The resurgence of violence in the last two weeks has cut off this short-lived reconstruction and sent thousands fleeing for safety. Government and private relief officials estimate that a half million people are sheltered in camps scattered about this island nation of 16 million.

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``The whole country is becoming a refugee camp,'' says A.T. Ariyaratne, president of Sarvodaya Shramadana, Sri Lanka's largest private relief agency. ``We have never seen anything of this nature.''

The new outbreak of ethnic strife has also dampened hopes of an early return of thousands of refugees who have fled overseas since the conflict began in 1983. The largest group is more than 100,000 Tamils who escaped to the south Indian state of Tamil Nadu, where 55 million Indian Tamils live.

After the signing of the peace pact in July, the Tamil refugees began returning, many in small boats that crossed the 22-mile strait that divides India and Sri Lanka. The trickle of returning refugees ended when new fighting broke out in the north and east, the traditional Tamil heartland.

India is eager to be rid of the refugees, who, the Indian government says, have cost almost $10 million to support. The presence of the Sri Lankan Tamils has also aggravated social tensions in Tamil Nadu, where Indian separatist movements have flared in the past.

India has ordered all refugees to register by the end of the year and has stepped up pressure on the Sri Lankan government to take the Tamils back. In turn, Sri Lanka says it wants to return to India thousands of Tamils who are not Sri Lankan citizens and came to the island to work on the tea plantations.

But observers say Sri Lanka will not be ready for the new rush of refugees, especially since the new round of fighting. ``The Indians want to move the Tamils out quickly, and Sri Lanka is not in a position to take them that fast,'' said a Western development official here.

The flood of refugees caught Sri Lanka unprepared, observers say, though government officials say there is no lack of money. Western aid donors have pledged to meet the estimated $400 million cost of rebuilding the country. Millions of dollars in interim relief has come from private and public overseas sources.

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Officials complain they cannot get supplies in fast enough to help the growing number of needy. Many refugees are caught in camps in heavily mined areas and are hemmed in by fighting between Indian troops and Tamil militants. In the besieged city of Jaffna, hundreds of thousands of people have been forced from their homes and are now fleeing the city as Indian troops ready their final assault on the town.

Refugee officials say that even if the fighting ends soon, it will be a long time before many return home. The government has earmarked $1.3 million to begin rebuilding homes this year, but relief officials say they cannot spend the money because of continued fighting. Houses restored after the peace agreement have been leveled.

``There are more refugee centers now than ever before,'' says Austin Fernando, head of the government's relief effort. ``Many people's houses have been burned and even if they wanted to go back, they couldn't.''

Much of the refugee work has fallen to thousands of private nonprofit organizations, observers say. Of these, Sarvodaya Shramadana was founded 30 years ago as an education and village development project. But today its main work deals with refugees.

The organization set up the first refugee camp in Sri Lanka after anti-Tamil riots in 1983, and now has more than 13,000 people in its own camps. It helps thousands of others through programs in 8,000 Sri Lankan villages.

But even for relief workers, the conflict has taken its toll. Sarvodaya Shramadana has lost 10 workers in the last four years, including its main official in Jaffna, who was tied to a lamppost by Tamil militants and shot.

Many relief officials think resettling refugees will be even more difficult than before the newest outburst of violence. Government relief efforts are tarnished by efforts in recent years to move Sinhalese refugee farmers into Tamil-dominated areas in the north and east.

Under the peace accord, the presence of large numbers of Sinhalese settlers has become even more unacceptable to the Tamil militants. The agreement calls for a referendum in which the people of the east will vote whether or not to join the north. Many feel the militants who want a united homeland would likely lose because of the large number of Muslims and Sinhalese.

Growing bitterness toward Indian troops among both Sinhalese and Tamils will also complicate relocation efforts, relief workers say. Widespread Sinhalese resentment toward the Indians has deepened as many refugees charge that, before the recent offensive, Indian troops allowed the militants to attack Sinhalese villages.

Although the Tamils initially welcomed the Indians as their protectors, the offensive against the militants and reported high civilian casualties have embittered many Tamils. Refugees fleeing Jaffna report widespread support for the militants against Indian troops.

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