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ECONOMYNEXT –Sri Lanka’s ongoing economic crisis would worsen if a creditor did not agree, a senior International Monetary Fund (IMF) official has said, amid concerns that China will not accept Western creditors over the restructuring of debt on an equal footing.

All Sri Lankan creditors, including China, must agree to restructure their existing loans to the island nation before the IMF begins disbursing a US$2.9 billion loan on which a preliminary agreement was announced on Thursday .

“If a creditor or creditors are unwilling to provide these assurances, it would indeed aggravate the crisis here in Sri Lanka and undermine repayment capacity,” Peter Breuer, the IMF’s senior mission chief, told reporters in Colombo. , when asked if China would not. agree on a debt restructuring plan.

“So a worsening crisis basically means that the resources available for servicing the debt would decrease,” he said at the press conference after wrapping up a nine-day visit to finalize the deal in the country. personnel level and a loan package for Sri Lanka’s reforms.

“So it is actually in the interest of all creditors to work together and with Sri Lanka so that Sri Lanka can emerge from this crisis as soon as possible and regain its ability to repay and service this new debt. who will come out of these debt negotiations.”

So far, China has not agreed to a debt restructuring that could include a haircut or an interest rate cut. Instead, China has expressed its willingness to refinance Sri Lanka to repay its previous borrowings without any changes, according to Lankan officials. on one’s last legs. Lazard served as legal counsel in the debt restructuring of Zambia where creditors included China.

The Paris Club of Western nations which has a well-defined unified process for dealing with defaulting nations, which is familiar to the IMF.

“Sri Lanka is in a special situation, with much of its public debt outside of Paris Club creditors,” Breuer said.

“It is important to act quickly. We want to prevent the crisis from getting worse.

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