(Bloomberg) -- Sri Lanka’s bilateral creditors held an inaugural meeting on the South Asian nation’s debt restructuring, with China sitting in as an observer. 

“If China decides to participate, we would welcome it,” Masato Kanda, Japan’s vice minister of finance for international affairs, said at a briefing late Tuesday in Tokyo. “We will continue to call on China to formally participate in the creditor countries’ meeting,” he said.

At Tuesday’s virtual interaction, the International Monetary Fund and World Bank officials briefed participants from among 26 nations, while Sri Lankan authorities shared the government’s economic and fiscal reform status, Kanda said.

Sri Lanka is trying to balance the demands of its creditors as it needs to reach debt sustainability as envisaged by the IMF, in order to secure funds from a $3 billion loan program approved in March. At the same time, the uncertainty of China’s participation in debt talks increases the risk of delays in forging a deal by the time of an IMF program review expected in September. 

Overseas investors are demanding that domestic bond holders share billions of dollars of losses, but the government’s proposal for a voluntary restructuring of its rupee-denominated bonds is finding few takers from banks worried about a hit to their capital.

Sri Lanka’s government is expected to present its final debt restructuring plan to investors by the middle of May.

Kanda couldn’t say when an agreement will be reached on Sri Lanka’s debt overhaul, while adding that creditors will aim to “close the deal as soon as possible.”

--With assistance from Emi Urabe and Paul Jackson.

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