COLOMBO- At an auspicious time early on Thursday, Dilani Jayaratne lit a small wood fire to boil a small pot of milk to mark the start of Sri Lanka's New Year.

The island nation's Sinhala and Tamil communities usually conduct the ceremony at home. But this year, Jayaratne and her family were at a tent camp in Sri Lanka's commercial capital Colombo, where thousands of people are protesting against the government's handling of a devastating economic crisis.

Demonstrations have raged across Sri Lanka for weeks as people angered by prolonged power cuts and shortages of fuel and medicine demand President Gotabaya Rajapaksa's resignation.

Jayaratne, 38, said she left home with her husband and two young sons around dawn and travelled for more than an hour to reach the protest site in Colombo located near Rajapaksa's office, which has been named "Gota-Go Village" by some. "We cannot just sit at home," said Jayaratne, adding that she hoped the protests would pressure Rajapaksa to leave the presidency.

Behind her, dozens of protesters lined up outside a tent where volunteers were distributing squares of kiribath or coconut milk rice, bananas, spicy pickles, and butter cake on paper plates - traditional New Year delicacies that were donated by supporters.

"We used to say best wishes for the New Year," said Jayaratna Teekanoon, 56, as he handed out bananas. "Now we say best wishes for the struggle."

In a New Year's message, Rajapaksa said the current crisis was the biggest challenge the country had faced in recent years. "We should overcome this challenge with unity and better understanding," he said in a statement.

Earlier this week, Sri Lanka said it would suspend repayment of external debts ahead of negotiations with the International Monetary Fund for a loan programme, instead using its meagre foreign reserves to provide essentials to its 22 million people.

Besides shortages, Sri Lankans are also struggling with rocketing inflation that has hit middle-class families like that of K.D.H. Kumara, a 44-year-old mechanic who said he was unable to meet household expenses and repay loans.

"I was someone who supported this president from the heart. I voted for Rajapaksa and even organised campaign meetings for him," said Kumara, carrying his two-year-old son who was munching away at a piece of kiribath.

"But now I'm extremely sad and disheartened. Things are so bad I can barely feed my family," Kumara said.

Hundreds of protesters had gathered closer to the colonial-era presidential secretariat, some waving the Sri Lankan flag. Other carried hand-written posters demanding the resignation of Rajapaksa and other members of his powerful family that have long dominated Sri Lankan politics.

Behind tall barricades, a contingent of helmeted police watched the protesters as they shouted slogans.

The president's elder brother, Mahinda Rajapaksa, currently serves as prime minister. Their younger brother, Basil Rajapaksa, was finance minister until earlier this month. Other members of the family also held government positions.

Carefully watching the pot of milk boil over, Jayaratne said she brought her sons to the site to show them the scale of the protests that have brought together Sri Lankans, cutting across ethnic, economic and religious divisions.

"My sons must know the truth. They must experience what is really happening in this country," she said.

"They will remember this New Year for the rest of their lives."

(Reporting by Uditha Jayasinghe and Devjyot Ghoshal in COLOMBO; Editing by Raju Gopalakrishnan)