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The Chinese government has reportedly agreed to grant a USD 1.5 billion package to Sri Lanka so that it may recover from the current economic crisis, Financial Ministry sources revealed.

Finance Minister Basil Rajapaksa had attempted to secure a loan from India but the efforts had failed. It is reported that through the intervention of the Central Bank Governor, steps had been taken to obtain USD 1.5 billion from China.

Accordingly, Sri Lanka may draw down on a 1.5 billion US dollar equivalent swap with the People’s Bank of China.

This is in the wake of Fitch Ratings, an international credit rating agency, recently downgrading Sri Lanka's credit rating from CC to CCC.

Fitch Ratings downgraded Sri Lanka's rating on interest rates and liquidity policy decisions, citing declining financial reserves and a foreign exchange deficit.

"The downgrade reflects our view of an increased probability of a default event in coming months in light of Sri Lanka's worsening external liquidity position, underscored by a drop in foreign-exchange reserves set against high external debt payments and limited financing inflows," Fitch Ratings said in a statement.

However, sources claim the Governor of the Central Bank has reported to Fitch Ratings that the amount of USD 1.5 billion in Chinese aid to be received by Sri Lanka, but Fitch had however gone on to downgrade Sri Lanka’s credit rating.

Meanwhile, the Central Bank disputed the hurried rating action by Fitch Ratings noting that the sense of urgency on the part of an internationally recognised rating agency to downgrade Sri Lanka is inconceivable, considering the fact that Fitch was being constantly updated by Sri Lankan authorities on the latest developments in all sectors of the economy and imminent foreign exchange inflows.