Foreign aid to Sri Lanka was significantly increased after a businessman from the country oversaw donations of more than £1 million to the Conservative Party, the Daily Mail reveals.

David Cameron announced last November that £6.6 million was being set aside for Sri Lanka over three years, including help for Tamils forced from their homes during the civil war.

In the year before the announcement, the Tory Party registered donations of more than £1million from Tamil businessman Subaskaran Allirajah and his controversial telecoms firm Lycamobile.

There are now questions about what has happened to the money, with UK aid money since going to the area in northern Sri Lanka where Mr Allirajah grew up.

Mr Allirajah, 44, is the founder and chairman of Lycamobile, a firm that sells pre-paid phone cards. He grew up in Mullaitivu, a Tamil area in the north of Sri Lanka. He is now worth £160million and is reportedly the 640th wealthiest person in Britain.

The revelations come after Mr Allirajah faced scrutiny over claims of tax fraud and money laundering at his firm.

In 2009, the UK ceased aid to Sri Lanka for all but humanitarian emergencies after the end of the civil war in the country.

But after Lycamobile started donating to the Tory Party two years later, funds were allocated to the country from the conflict pool – a pot set aside for tackling instability overseas.