Strategic competition between China and Western countries is increasingly shaping sovereign debt restructuring outcomes, with developing countries bearing the greatest economic and social costs. Sri Lanka’s recent restructuring illustrates how geopolitical fragmentation can stall necessary financing and delay crisis resolution. While Western governments, alongside India and Japan, moved to finalize financing assurances, China withheld support pending its demand that multilateral claims be included in the restructuring framework. The resulting deadlock delayed approval of Sri Lanka’s International Monetary Fund (IMF) program by several months, prolonging macroeconomic instability and slowing recovery. With approximately 27% of countries globally facing debt stress, these obstructions underscore how such power dynamics can exert substantial consequences for developing nations.