COLOMBO, July 23 (Reuters) - Five Tamil Tiger fighters were killed in a clash with army troops in the island's restive northwest overnight, the rebels said on Monday, claiming to have inflicted heavy casualties on the military.

The incident in the northwestern district of Mannar came hours after Sri Lankan police found and defused a powerful bomb at a fair just 3 miles (5 km) from a rally attended by President Mahinda Rajapaksa near the capital Colombo.

It also comes after a rash of land and sea clashes, ambushes and air raids that have killed an estimated 4,500 people since last year alone.

"The two-pronged attempt of the SLAF (Sri Lankan armed forces) ... was thwarted by the LTTE frontliners. The SLAF formation fell back with heavy casualties and material loss," rebel military spokesman Rasiah Ilanthiraiyan said in a statement.

The military said it retaliated to a rebel mortar bomb attack and said it had no immediate details of any casualties.

Analysts say the foes tend to exaggerate enemy losses and play down their own in a war that has killed nearly 70,000 people since 1983. There was no independent confirmation of what had happened or how many people were killed.

The Tigers have lost vast swathes of territory in the island's east in recent months in the face of army advances, and the focus of fighting has now shifted to the north, where the Tigers run a de facto state they want recognised as independent.

But while losing their foothold in the east was a significant military defeat, the Tigers have vowed to switch to guerrilla warfare tactics in a bid to cripple the economy with attacks on major military and economic targets and analysts see no clear winner on the horizon.

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