With rumours going around that Sydney may lose 2002 Gay Games, the Federation of Gay Games has declared yesterday that the world's biggest gay and lesbian event will go on in the Australian city, reports the Sydney Morning Herald.

The press reported that due to sponsorship and organisational problems, the Games may either be scaled down, moved to another city or be entirely cancelled, according to a leaked Federation board memo a fortnight ago.

Officials from the US-based ruling international body are now confident that the Sydney organisers will ?deliver the Games? after completing a weeklong site visit in Sydney.

The Sydney organisers who have been struggling to get sponsorship after the collapse of it?s original sponsor - Satellite Media, owes the federation a license fee totaling about US$650,000 (A$1.28 million).

The federation has made a major financial concession to Sydney, allowing payments to be rescheduled rather than be paid periodically. A principal sponsor for the Games will also be announced at a later date.

Ms Bev Lange, co-chair of Sydney 2002 said the Games, which will attract more participants than last year?s Olympics, is worth an estimated A$100 million to the NSW economy.