Goschen-Joubert settlement, and being continued in later settlements grew to be one of the most important institutions in Egypt. This security was the establishment of a Treasury of the Public Debt, known by its French title of Caisse de la Dette, and commonly spoken of simply as “the Caisse.” The duty of this body was to act as receivers of the revenues assigned to the service of the debt. To render their powers effective they were given the right to sue the Egyptian government in the Mixed Tribunals for any breach of engagement to the bondholders.
The Goschen-Joubert settlement was accompanied by guarantees against maladministration by the appointment of an Englishman and a Frenchman to superintend the revenue and expenditure—the “Dual Control”; while a commission was appointed in 1878 to investigate The Law of Liquidation. the condition of the country. The settlement of 1880 was effected on the basis of the proposals made by this commission, and was embodied in the Law of Liquidation of July 1880—after the deposition of Ismail. For the purposes of the new settlement the loans raised by Ismail on his private estates, those known as the Daïra (i.e. “administrations”) and Domains loans, were brought into account. By the Law of Liquidation the floating debt was paid off, the whole debt being consolidated into four large loans, upon which the rate of interest was reduced to a figure which it was considered Egypt was able to bear. The Egyptian debt under this composition was:
| Privileged debt | £22,609,000 |
| Unified debt | 58,018,000 |
| Daïra Sanieh loan | 9,513,000 |
| Domains loan | 8,500,000 |
| £98,640,000 |
The rate of interest was, on the Privileged debt and Domains loan, 5%; on the Unified debt and Daïra loan, 4%. Under this settlement the total annual charges on the country amounted to £4,500,000, about half the then revenue of Egypt. These charges included the services of the Privileged and Unified debts, the tribute to Turkey and the interest on the Suez Canal shares held by Great Britain, but excluded the interest on the Daïra and Domains loans, expected to be defrayed by the revenues from the estates on which those loans were secured. The general revenue of Egypt was divided between the bondholders and the government, any surplus on the bondholders’ share being devoted to the redemption of the capital.
The 1880 settlement proved little more lasting than that of 1876. After a brief period of prosperity, the Arabi rising, the riots at Alexandria, and the events generally which led to the British occupation of Egypt in 1882, followed by the losses incurred in the Sudan in the effort to prevent it falling into the hands of the Mahdi, brought Egypt once more to the verge of financial disaster. The situation was an anomalous one. While the revenue assigned to the service of the debt was more than sufficient for the payment of interest and the sinking fund was in full operation, the government found that their share of the revenue was altogether inadequate for the expenses of administration, and they were compelled to borrow on short loans at high rate of interest. Moreover, to make good the losses incurred at Alexandria, and to get money to pay the charges arising out of the Sudan War and the Arabi rebellion, a new loan was essential. On the initiative of Great Britain a conference between the representatives of the great powers and Turkey was held in London, and resulted in the signing of a convention in March 1885. The terms agreed upon in this instrument, known as the London Convention, were embodied in a khedivial decree, which, with some modification in detail, remained for twenty years the organic law under which the finances of Egypt were administered.
The principle of dividing the revenue of the country between the Caisse, as representing the bondholders, and the government was maintained by the London Convention. The revenue assigned to the service of the debt, namely, that derived from the railway, telegraphs, port of Alexandria, customs (including tobacco) and from four of the provinces, remained as before. It was recognized, however, that the non-assigned revenue was Provisions of the London Convention. insufficient to meet the necessary expenses of government, and a scale of administrative expenditure was drawn up. This was originally fixed at £E.5,237,000,[1] but subsequently other items were allowed, and in 1904, the last year in which the system described existed, it was £E.6,300,600. The Caisse was authorized, after payment of the coupons on the debt, to make good out of their balance in hand the difference between the authorized expenditure and the non-assigned revenue. If a surplus remained to the Caisse after making good such deficit the surplus was to be divided equally between the Caisse and the government; the government to be free to spend its share as it pleased, while the Caisse had to devote its share to the reduction of the debt. This limitation of administrative expenditure was the cardinal feature and the leading defect of the convention. Those responsible for this arrangement—the most favourable for Egypt that Great Britain could secure—failed to recognize the complete change likely to result from the British occupation of Egypt, and probably regarded that occupation as temporary. The system devised might have been justifiable as a check on a retrograde government, but was wholly inapplicable to a reforming government and a serious obstacle to the attainment of national prosperity. In practice administrative expenditure always exceeded the amount fixed by the convention. Any excess could, however, only be met out of the half-share of the eventual surplus reached in the manner described. Consequently, in order to meet new expenditure necessitated by the growing wants of a country in process of development, just double the amount of revenue had to be raised.
To return to the provisions of the London Convention. The convention left the permanent rate of interest on the debt, as fixed by the Law of Liquidation, unchanged, but to afford temporary relief to the Egyptian exchequer a reduction of 5% on the interest of the debt was granted for two years, on condition that if at the end of that period payment, including the arrears of the two years, was not resumed in full, another international commission was to be appointed to examine into the whole financial situation. Lastly, the convention empowered Egypt to raise a loan of nine millions, guaranteed by all the powers, at a rate of interest of 3%. For the service of this loan—known as the Guaranteed loan—an annuity of £315,000 was provided in the Egyptian budget for interest and sinking fund. The £9,000,000 was sufficient to pay the Alexandria indemnities, to wipe out the deficits of the preceding years, to give the Egyptian treasury a working balance of £E.500,000 and thereby avoid the creation of a fresh floating debt, and to provide a million for new irrigation works. To the wise foresight which, at a moment when the country was sinking beneath a weight of debt, did not hesitate to add this million for expenditure on productive works, the present prosperity of Egypt is largely due.
The provisions of the London Convention did not exhaust the restrictions placed upon the Egyptian government in respect of financial autonomy. These restrictions were of two categories, (1) those independent of the London Convention, (2) those dependent upon that instrument. In the first category came (a) the prohibition to raise a loan without the consent of the Porte. The right to raise loans had been granted to the khedive Ismail in 1873, but was taken away in 1879 by the firman appointing Tewfik khedive. (b) Next came the inability to levy taxes on foreigners without the consent of their respective governments. This last obligation was, in virtue of the Capitulations, applicable to Egypt as part of the Ottoman empire. The only exception, resulting from the Ottoman law under which foreigners are allowed to acquire and hold real property, is the land tax. (All taxes formerly paid by natives and not by foreigners have been abolished in Egypt, but the immunity described constitutes a most serious obstacle to the redistribution of the burden of taxation in a more equitable manner.)
- ↑ The figures of the debt are always given in £ sterling. The budget figures are in £E. (pounds Egyptian), equal to £1, 0s. 6d.
