Finances

( Originally Published 1900 )

Revenue and Expenditure Forty Years ago—Situation at Commencement of the Present Reign—Present Main Elements of Egyptian Finance—What the Revenue now consists of—The Expenditure—Explanation of its Increase—History of the State Debt—The Crisis of Last Year-Mr. Cave's Mission, and his Report—The French Unification Scheme—Its Failure—The Göschen-Joubert Scheme—Its Merits and Defects—Its Acceptance by the Khedive—The New Financial Administration—Its Guarantees—The Essential Solvency of the Country.

THE finances of Egypt have followed the same law of growth which has ruled in nearly every economical feature of the country during the past forty years. In 1835 the revenue was estimated at 2,600,0001., and the expenditure at about 2,300, 0001., without any public debt whatever. In 1862, the last year of Saïd Pasha's reign, the figures had risen respectively to 4,929,0001. and 4,330,0001., with a debt of 3,292,3001.; while last year' s Budget claimed an income of 10,772,6111., against an outlay (exclusive of interest on the floating debt) of 8,981,8521., with a total State debt since fixed by the (Göschen-Joubert scheme at 76,000,0001. Of these large aggregates, the first is sufficiently explained by the development in the trade and productive industries of the country, the second mainly by the cost of an improved administration and the charges on the national debt, and the gross total of this last itself in great part by a heavy outlay on public works which within the past sixteen years has, in this respect, placed Egypt on a level with most second-rate European States, but largely also by a vicious system of financing which has burthened the country with a mass of debt beyond its fair capacity to bear.

It will be convenient to consider these three main elements of Egyptian finance in separate detail.

I. The Revenue may be grouped under the five heads of (1) Direct and (2) Indirect taxes, (3) the Moukabala and Village Annuities, (4) Railway profits, and (5) Miscellaneous Receipts.

Of these the first include (a) the land taxes, (b) the tax on date-trees, and (c) trade licenses. As regards the first of these, the latest official report states the total area of land under cultivation at 4,805,107 feddans (acres), of which 3,580,239 pay a rent-charge (miri) averaging about 22s. per feddan, and the remaining 1,224,868—held under the privileged tenure explained elsewhere—only a tithe or quit-rent (oushur) of about 7s. per feddan all round.* The revenue from both these taxes last year amounted roundly to 4, 306,0001., and may be fairly expected to reach 4,500,0001. within the next four or five years, when new land already reclaimed falls under taxation. While the heavier of these taxes, too, may be regarded as moderate in a country in which the gross yield of cultivated land ranges from 81. to 121., or even 151. an acre, the fact that one-fourth of the whole pays only the minor charge shows how large a taxable reserve the Government possesses in this main source of its revenue. On the other hand, as most of these privileged estates belong to members of the Viceregal family or other influential persons, there is not much present likelihood of their being brought under the higher assessment. The tax on date-trees—at the average rate of 10d. each on 4,467,000 trees—represents a receipt of about 189,0001., being an increase of 3, 0001. on the previous year's Budget. This particular impost, however, admits of but little extension, and the margin for further productiveness is less than this difference would seem to suggest. It is even probable that any readjustment of taxation may rather reduce than augment the sum received from this source, as the tax is in reality a second impost levied from land which already pays either miri or oushur. Trade Licenses, on the other hand, which last year yielded 422,0001. against 286,5001. in 1874, may be safely reckoned on for an increase, not probably at this high ratio, but in fair proportion to the growth in the trades and skilled industries of the country, on which this tax of less than 11. 8s. per head of those engaged in these avocations is the only direct impost levied.

The Indirect Taxes comprise the Customs and Tobacco duties ; octrois and various other tolls falling under the head rather of miscellaneous local, than of general taxation. The Customs, although hitherto very badly man-aged, last year produced 639, 0001. from an ad valorem tariff of nominally 8 per cent, on imports, and 1 per cent. on exports, fixed by the existing commercial treaties with the Porte an early modification of the tariffs of which is probable under the new powers of the Khedive. As it is, the revenue of the department, during the past fifteen years has supplied a fair gauge of the contemporary prosperity of the country. Thus, while in 1861 the total value of exports and imports (including goods in transit) on which duty was paid—there is no accessible record of the actual receipts—was only 6,445,4451., in 1863, when the cotton famine had abnormally stimulated the growth and export of that staple, the Customs revenue of the year rose to nearly 1,240,0001., and in the reaction that ensued fell in 1867 to 482,7801. A stationary period followed from the latter year to 1871, since which, without any exceptional activity, and notwithstanding the diversion of almost the whole Indian traffic to the Suez Canal, a nearly regular annual improvement has taken place. A measure of the extent to which bad administration has hitherto checked this is suggested by the fact that, while the receipts of the Alexandrian Custom House for 1872 should, according to an authoritative calculation, have amounted to 558,7871., those from the whole of the ports reached only 541, 2151., or 17, 5101. less than what ought to have been the year's revenue from Alexandria alone.* Under the new European management, the abuses which explain this anomaly will doubtless diminish, if they do not altogether cease, and the department may be regarded as one of the most expansive sources of Egyptian revenue, irrespective of the probable increase of the present low rate of 1 per cent. on exports when the existing treaty expires. Similarly, as regards the tobacco duty, which, when fixed five or six years ago, was reckoned to produce 500,0001. a year, but has as yet not exceeded 264,0001. The deficit on this item has no doubt been largely caused by smuggling, for the estimate itself is a moderate one for an almost universally smoking population of nearly 5,500,000, and may be fairly expected to be approached, if not fully realised, under a more efficient system of customs and excise control. The tax on which it is based is only 20 piastres per oke, or about 1s. 6d. per lb.—less than half our English duty—and as the yearly importation, over and above what is used of native growth, exceeded 2,800,000 okes (=7,700,000 lbs.), a revenue of 500,0001. would still leave a margin of more than 10 per cent. for reduced consumption or other causes. For the present, however, the proceeds of this tax fall slightly below 264, 0001. a year.

The Moukabala and Village Annuities are not properly taxation at all, but terminable receipts involving, eight years hence, a large permanent reduction of revenue. The former—which means "compensation" is the name given to a measure introduced in 1871 to redeem half the land-tax, with a view to paying off the then float- ing debt with the proceeds, without having recourse to a foreign loan. At that time the great majority of Egyptian landowners had no legally regular title-deeds to their property, and in consideration of their consenting to pay six years' land tax in advance—either in one payment or in six yearly installments—the Government proposed to give them indefeasible titles, and to reduce this tax by one-half for all time. The measure was, however, found to be impracticable. Only the wealthier proprietors could afford to comply with its terms in either alternative, and after about 8,000,0001. of the estimated total of 27,825,0001. had been encashed, it was found necessary to commute the proposed six installments into twelve annual payments of about 1,530,0001.—reckoning a discount of 8 1/3 per cent. to be allowed on each installment—after the last of which, payable in 1885, half the tax, whether mire or oushur, will be forever redeemed. This modification of the measure of course defeated its original object, and saddled the Government with an engagement which, however advantageous to the landowners who could afford to bear the immediate burden, was fiscally ruinous to the Treasury ; seeing that for a sum of in all less than 27,000,0001. spread over a dozen years, it thence afterwards surrendered for all time nearly 2,500,0001. a year of its surest and most easily collected revenue. The money, however, was urgently needed, and the measure was therefore upheld till May of last year, when, the difficulties of the floating debt having culminated, the Government—yielding to the pressure and evil counsels of the influential group of French financiers by whom the large mass of its Treasury bonds was chiefly held—decided on unifying the whole of its debt, funded and floating, on terms which, amongst others, provided for its redemption in sixty-five years. To enable it to bear the heavy interest-charge which this arrangement entailed, it was resolved not to reduce the land-tax, and by the decree of May 7th the Moukabala was abolished, the Government being left to make what compromise it could, if any, with the proprietors who had already paid under it up to that date. But the scheme of which this was a feature having failed to meet with acceptance in England, fell through, and on reconsideration the Government, after consulting the Assembly of Delegates, decided on maintaining the Moukabala, and keeping faith with the contributory landholders. Accordingly, when the substituted project of Messrs. Goschen and Joubert was negotiated six months later, the Moukabala formed part of it, and is now again in revived operation, with this modification, that the discount or bonus of 8* per cent. by whose operation the half-tax was to be redeemed within the twelve years is now withdrawn, and the whole of the reduction will come into force at once in 1886. The effect of this will be to augment the receipts from the measure by about 135,0001. a year—at the expense, of course, of those who previously received that amount in rebate. But even with this increment the present advantages derived from the item must be regarded as dearly bought at the cost of the sacrifice it will entail eight years hence. This will no doubt be in great measure recouped by the taxation of new land and the general expansion of revenue in the meantime ; but that improvement would have accrued in any case, and the necessity for a measure which thus so largely discounts the future is, therefore, none the less to be regretted. The Village Annuities only resemble the Moukabala in being similarly terminable. These date from 1870, when, in con-sequence of the sudden reduction in the price of cotton which followed the temporary rise caused by the American civil war, the growers were unable to repay the large advances made to them by the merchants and money-lenders during the inflation of the market. The Government came to their relief, and, taking on itself the collective debt of about 1,000,000, issued in payment of it interest-bearing " Village Bonds" spread over seven years. This term was subsequently extended to twelve years, and the annuities will therefore expire in 1885, up till which time the Treasury is being repaid by the original debtors at the rate of 160, 0001. a year. The termination of both these items will, consequently, involve an annual reduction in the revenue of about 1,820,0001. after 1885.

Profits on Railways, the next important item, may be credited with similar elasticity to that experienced in the Customs, arising from a steady increase in the traffic, gradual improvement in the administration, and the continuing extension of this class of public works. All three of these causes combine to explain the growth of revenue from this source from 361, 3001. in 1863, the first year of the present reign, to 990,2001., the net amount received from it by the Treasury last year. The cheapness with which the lines are worked no doubt also contributed to this result—the cost of working being only about 46 per cent. of the receipts, or, if telegraph revenue and other " rents " received by the department be included, about 41 per cent., as compared with 53 per cent. spent on most European lines. This low proportion of working cost to revenue arises mainly from the moderate rate of speed at which trains are driven, and from the employment chiefly of native labor. Taking the aggregate of the lines now open at 1,100 miles—a mileage which, in proportion to population, is greater than that of either Austria, Hungary, or Spain—and estimating their cost at the locally high average of 11, 0001. a mile, these net profits of last year represent a dividend of nearly 8 per cent. on the capital spent on the system, irrespective of its indirect effect on other branches of revenue by promoting commercial activity and the general prosperity of the country. That still better results will be realised under the new European administration of the lines may be confidently expected ; and although the property in them is still retained by the Govern-ment, the "privileged" stock to which their revenue is now specially hypothecated, may, for all practical purposes, be regarded as high - class railway debentures.

The remaining aggregate of receipts, grouped under the head of " Miscellaneous," and amounting in the total last year to about 2,100,000, is made up of 519,000. received as octroi and other municipal dues in Cairo and Alexandria; of 202,0001. collected as indirect taxes by the provincial prefectures ; of 306,000. derived from the salt monopoly; of 467,000l. of special crown rents and duties payable to the Ministry of Finance ; of 245,0001l. from the Post Office, salt-fish farming, lock, canal, bridge, and harbour tolls and dues (other than those of Alexandria) ; of 143,000l. net revenue from the Soudan ; and about 220,000l. of arrear taxes.

This last item being deducted, the revenue for the year was roundly about 10,500,0001., of which rather less than 7,000,000l. was the proceeds of actual taxation, the remainder representing the redemption of future taxes, the payment of old ones, railway • receipts, canal, bridge, and other dues, which were not in fact taxes in the ordinary sense, but payment for equivalents received. The whole positive taxation of the year, therefore, was about 25s. per head of the population, an amount which, although not oppressive, is still relatively high for a country in which the great majority of the people are much poorer than the corresponding classes in Europe. Indeed, the strain in this direction has reached a point beyond which, for some years at least to come, it cannot be safely carried, and the further growth of the Egyptian revenue must, therefore, depend rather on the reclamation of new land to cultivation and the general expansion of trade than on any possible increase in the present fiscal burdens of the country. It may be doubted, indeed, whether under the humane and more equitable system of assessment and collection which has been recently introduced, last year's aggregate of receipts will be even maintained. The taxation of foreigners, who still most inequitably enjoy their old fiscal exemption under the Capitulations, might fairly be made to yield 200,000l. a year, but of this there is no present likelihood, and from further taxation in any direction there is therefore nothing to be reasonably hoped.

II. Passing from revenue to Expenditure, the latter, we find, has grown rather more than pari passu with the former—an unsatisfactory feature, which is however explained by the great outlay on public works and the yearly increasing charges of the public debt. But this side of the account is now simplified, and its figures for the future controlled by the recent arrangement which assigns a fixed sum for administration, and allots the balance of the revenue, be it much or little, for the service of the debt. Previously there was no check upon the former, and where the outlay on it and the annuities on the debt exceeded the year's income, the deficit was met by the vicious expedient of fresh borrowing at usurious rates of interest, till borrowing became no longer possible, and the inevitable crisis of last year ensued. To this mischievous license the decree of November last put an end, and so long as it remains in force the spending powers of the Government are limited—for the present and next year to 4,259,3501. and 4, 403,9611. respectively, and thence afterwards, till 1886, to 4,500, 0001. a year. Although, therefore, the Estimates on this side of recent Budgets have now little more than an historical interest, their chief items—which, more or less modified, are still those of the current expenditure—may be mentioned. First comes 685,3081. for tribute to the Porte. Up till 1866 this item was only 376, 0001., but in that year, in consideration of the firman which changed the order of succession, the payment was increased to 670, 3081., to which 15, 0001. a year has since been added for the cession of Zeyla. The Civil List of the Khedive. (300,0001.), raised by grants to the heir apparent, his Highness's other sons, and the numerous families of the preceding Viceroys to 560,000l. —including 60,000l. a year to Prince Halim Pasha-cannot be considered excessive. But nearly 880,0001. for the Ministries of War and Marine might be more easily reduced, without injury or peril to any interest of the country ; for, politically conditioned as Egypt now is, with absolutely nothing to fear from within or without, a standing army of 30,000 men and a navy to match, are clearly in excess of its military wants.* The reduction of the estimate for public works from 1,041,0001. in 1874, and 512, 5001. in 1875 to 205, 0001. for last year, shows how purely optional had been the previous outlay in this direction ; and but that the contracts for the Soudan Railway, to which nearly the whole of this last sum is allocated, have been taken, even that amount might have been kept out of the year's Budget. As it is, barring this inevitable item, fresh expenditure on this class of works has been wholly suspended, and for some years to come is not likely to be resumed on the old scale. The considerable item of 200,0001. for the expenditure of the Rouznameh on yearly gifts to Mecca, the cost of the annual caravan, and other charitable outlay, will not readily bear reduction in a country on three-fourths of whose population the fervid national faith has still a powerful hold. But for the recent large addition of foreigners at high salaries to the staff of the chief. Minis-tries, sensible economies might have been effected in the cost of nearly the whole by reducing the number of inferior native employés, who swarm superabundantly both in Cairo and throughout the provincial administrations. As it is, the most that can be hoped for is that the economic winnowing of the one class will balance the new additional expense of the other. The Ministers them-selves and the higher native functionaries are not extravagantly over-salaried, as in Turkey; and in their case little or no reduction can be fairly made. The interest (198, 8291.) on the Suez Canal shares, sold to the British Government, is of course a settled item till the bonds rank for dividend, in 1894, and was accordingly provided for in the increased administrative Budget fixed by the decree of November last. But one chapter of expense that weighed heavily on this side of the national account is now, it may be hoped, closed. Henceforth the Khedive may quite safely refuse payment of the blackmail to Constantinople, which, though officially unconfessed to, in some years notoriously exceeded the nominal tribute. It will be his own fault if he submits any longer to extortions which have now no more excuse in policy than in treaty right. This administrative first charge on the revenue may, therefore, be regarded as ample for all its purposes; and, except in the extreme event of another cattle murrain, a destructive Nile, or some similar force majeure necessitating extraordinary outlay, there is no reason to apprehend either need or disposition on the part of the Government to exceed the limit thus wholesomely imposed.

III. The Debt of Egypt has outstripped in rapidity of growth the large totals of revenue and expenditure just noticed. As settled by the decree of November last, it now roundly amounts to 80,393, 0001., and yet the first borrowing dates only from 1862, when the commitments of Said Pasha to the Suez Canal Company, and the pressure of—for those halcyon days—a heavy home debt, compelled him to imitate the example of the Porte and appeal to the European money markets for a loan of 3,292,8001. A simple statement of the terms on which this and the subsequent loans were effected will go far to explain. the recent financial straits of the Egyptian Government. No particulars have _been published of the rate at which this first operation of 1862—a 7 per cent. stock, with a sinking fund of 1 per cent.—was taken by the contractors, Messrs. Frühling and Gôschen ; but as it was placed in two separate issues of 82i and 84i per 100, it may be assumed that commission and other charges reduced the actual sum realised by the Treasury to a mean of not more than 80, or a net total of, roundly, 2,500,0001., instead of 2, 744, 0001., the amount paid by the public.

Be this as it may, the proceeds of the operation met less than half the wants of the Government ; and, on the death of Said Pasha, in January, 1863, his successor found clamouring for liquidation a balance which there was no hope of discharging out of revenue. A second loan was thus necessitated, and this-for 5,704,2001., with 7 per cent. interest and 3.87 per cent. sinking fund—was successfully issued by the same contractors towards the close of 1864, at 93 per 100, but, with commission and other deductions, only realised net 4,864,0631. to the Government. It was hoped that the proceeds of this operation would clear off the balance of debt bequeathed by Said Pasha, and leave a considerable surplus for the public works which the new Viceroy had undertaken soon after his accession. But the expectation was falsified by the cattle murrain that broke out shortly after-wards and for nearly two years ravaged the whole country from the Delta to Nubia. This epidemic cost the country nearly 5,000,0001.—in loss of revenue, in importing cattle to replace those swept away, in supplying agricultural machinery, and in distributing corn and other relief to the fellah eon who had suffered most from its effects. The Alexandria and Suez railway—the only one then existing in the country—had been left by the late Viceroy in a state of complete dilapidation, and to repair it, and renew the rolling stock, a special debenture loan for 3, 000,0001. was effected in 1866-again through Messrs. Fruhling and Göschen-on the security of the railway itself. This, which was also a 7 per cent. stock, redeemable in eight years,* was issued to the public at 92 per 100, but realised to the Government only 2,640,0001., on which the actual charges, therefore, be-came 8 per cent. for interest and 18.9 per cent. for sinking fund, or an annuity in all of 26.9 per cent. In the meantime, the abolition of forced labour on the Suez Canal, and the modification, in other important respects, of the Said Pasha's contract with the Company, had raised a crop of differences between the latter and the Government. The Viceroy having been induced to refer these to the arbitration of the Emperor Napoleon, his Majesty awarded to the Company the enormous indemnity of 3,360,0001., in 12 per cent. Treasury bonds, to which was subsequently added, in 1866, a further cash payment of 400,0001. for the re-purchase of the Wady domain, which the Company had bought some years be-fore from Said Pasha for 74, 0001. To meet the mass of floating debt thus created, and at the same time to provide in part for the public works already begun or contemplated, the large 11,890,0001. loan of 1868 was next contracted, through Messrs. Oppenheim and Co., in concert with the Imperial Ottoman Bank and the Société Générale of Paris. This, although like Said Pasha's loan of 1862, a 7 per cent. stock, redeemable in thirty years, was issued at the low price of 75 per 100, and contractors' commission and charges--which grew heavier with each new operation—being again deducted, produced to the Treasury only 7,193, 3341., at a total annual cost of 13 1/4 per cent. Nevertheless, with the amount realised, nearly the whole of the floating debt was paid off, and for a considerable time-discount in Egypt fell to the unprecedentedly low average of from 6 to 8 per cent. But the continuing heavy outlay on harbours, railways, telegraphs, canals, and other great works, which were being carried out in a scale far beyond—not indeed the wants, but the concurrent means of the country, soon again compelled recourse to the issue of new Treasury bonds, to nearly the full extent of the expenditure thus incurred. The revenue had increased largely since the death of Said Pasha, owing to the steady expansion which had taken place in nearly every branch of Egyptian industry and trade ; but the re-organisation and re-armament of the army, the construction of new coast defences, the doubling of the tribute to the Porte, and other large though officially unacknowledged payments to Stamboul, had swelled the expenditure in equal ratio, and, after payment of the charges on the foreign debt, left little or nothing for public works. The creation of a new floating debt at a greatly increased rate was the necessary result ; till in the spring of 1873, the total of these unfunded liabilities had risen to nearly 26,000,0001., on which the average interest charge was not less than 14 per cent. It was, therefore, resolved to fund the whole of this large amount ; and, with this view, a 7 per cent. loan for 32,000,0001. (nominal, designed to consolidate the whole, was negotiated with Messrs. Oppenheim and substantially the same group who had cooperated with them in the loan of 1868. Partly owing, however, to the monetary disturbance occasioned by the American panic in the spring of 1873, and partly no doubt to the largeness of the operation, the issue of the first half of this loan at 841 was not a success, and, although this amount had been taken "firm" by the contractors, the Khedive was induced to accept a much lower price, and the large remainder of the stock was obtained on terms which permitted its being gradually placed on the market at an average rate of about 70. This costly operation realised to the Government only 20, 740,0771., of which, too, 9,000,0001. was paid, not in cash but in long dated bonds of the floating debt, bought up by the contractors at various rates of discount (much it was said as low as 65), and delivered to the Treasury at 93—an operation which, as Mr. Cave pointedly remarks, " materially enhanced the profit accruing to the negotiators of the loan."

Thus, out of five loans of a total nominal amount of 55,887,0001., the Egyptian Treasury received only about 35,000,0001. in cash or its equivalents at the current market rate ; and on this--according to a return furnished by the Minister of finance—it had already repaid no less than 29,570,994l. in interest and sinking funds up to the end of 1875, when 46,734,5001. nominal still remained to be redeemed.

[Besides the national debt proper of Egypt, incurred on these ruinous terms, the Khedive himself had contracted three other foreign loans on the security of his own private domains, the charges on at least two of which became so mixed up with those of the State debt as to contribute materially to the thickening difficulties of the Treasury. It will, however, be more convenient to notice these private borrowings in connection with the subject of the Daïra, on the credit of which they were raised, and the revenues of which have recently been hypothecated for their redemption. To return, therefore, to the State debt.]

As the cash proceeds of the 18'73 loan amounted to only about 11,000,0001.,* it barely relieved the embarrassment it was meant to extinguish, and a mass of floating debt therefore still remained, which the cost of renewals (many at as much as 30 per cent.), continued heavy outlay on pub: .c works, and the cost of the Abyssinian war (set down in Mr. Cave's Report at only 1,000,0001., but in reality believed to be much more), rapidly swelled again to a figure against which the Treasury became increasingly powerless to struggle. Towards the end of 1875 its difficulties had culminated to a point that would have then compelled a suspension of payment but for the sale of the Khedive's shares in the Suez Canal to the British Government, the 3,976,5831. received for which temporarily staved off the crisis. With a view to avert this altogether by a radical re-organisation of his financial administration, his Highness requested Her Majesty's Government to send him a couple of experienced Treasury officers to carry out the proposed reform ; but, instead of these, the Right Hon. S. Cave, M.P., was commissioned—not to do what the Khedive wanted, but to investigate and report upon the whole details of Egyptian finance. Accompanied by Colonel Stokes, R.E., and three Foreign Office clerks, Mr. Cave proceeded to Cairo in December, 1875, and during the following couple of months siftingly examined the Treasury and Daïra ac-counts, so as to ascertain as nearly as might be the debts and resources of both. The result was embodied in an elaborate Report which, corroborated as its chief conclusions have since been by other official English and French investigations, may be accepted as an authoritative statement of the main facts of Egyptian finance eighteen months ago.*

But, although this Report demonstrated that both the State Treasury and the Daïra were essentially solvent, and needed only better administration to readily meet all their liabilities, its publication at the time—coupled with the refusal of Her Majesty's Government to lend the Khedive a commissioner to assist in framing and carrying out the suggested reforms—rather damaged than benefited Egyptian credit ; with the result that his Highness, unable to renew his maturing Treasury bonds except at absolutely ruinous rates, wisely decided on temporarily suspending payment of the whole till some equitable re-adjustment of the burden could be arranged. The total amount of the floating debt—chiefly in the form of Treasury bonds—had then roundly reached 22,500,000l. (reduced by the proceeds of the Suez Canal shares to 18,250,0001.), the greater part of which was held by a French group represented by the Anglo-Egyptian Bank, the Crédit Foncier, and Comptoir d'Escompte of Paris. As above mentioned, a scheme was accordingly framed by the agents of this combination, without reference to the funded bondholders ; and under pressure of the strongest official French influence exerted in its support, this was accepted by the Khedive and embodied in a decree, dated May 7, which announced the consolidation of all the debts of the State and the Daira--with a bonus of 25 per cent. to the holders of the Treasury bonds--into one unified 7 per cent. stock of 91,000,0001., redeemable in sixty-five years. This extraordinary measure—which was as inequitable to holders of the old loans as its charges were beyond the means of the Egyptian exchequer—was not, it need hardly be said, received with favour in England, where most of the funded debt was held, and the Committee of the Stock Exchange gave extension to the general feeling by announcing its intention ;o refuse quotation to the proposed new "unified" stock. After vainly struggling against the effects of this announcement, the French scheme virtually collapsed, and its promoters recognised the necessity of conciliating English co-operation in some sounder and fairer project. The Rt. Hon. G. J. Goschen, M.P., whose connection with the earlier Egyptian loans and influential personal position suggested him as an acceptable representative of the English bondholders, was accordingly invited, early in July, to undertake a joint mission, with M. Joubert as agent of the French group, to negotiate with the Khedive some settlement of the difficulty that should be at once practicable and just to all concerned. The suggestion having been approved by the bondholders, Messrs. Goschen and Joubert proceeded to Cairo in the beginning of October, and, after receiving from the Khedive the amplest facilities to repeat the investigations which had been already exhaustively prosecuted by Messrs. Cave, Rivers Wilson, and Villet, they devised a substitute for the French scheme which, if not all that could be desired from the point of view of English interests, was a considerable improvement on that measure. Accepting both the assimilation of secured and unsecured creditors, and the gross debt of 91,000,0007. fixed by the decree of May 7, they reduced this nominally to 59,000,0001.—(1) by cutting down from 25 to 10 per cent. the totally inequitable bonus given to the holders of Treasury bonds ; (2) by eliminating the whole debts of the Daira ; (3) by detaching the short 1864, 1865, and 1867 loans (as Mr. Cave had pro-posed) for redemption by the Moukabala ; and (4) by converting 17,000,0001. into a Preference Stock, secured on the railway revenue and the harbour dues of Alexandria, and of which all State creditors, except holders of the short loans, should receive a pro raid allotment of about 38 per cent. The 17,000,000l. of Preference Stock thus created included 2,000, 0001. of an advance to the Treasury against the extra hypothecation of the port dues ; and, with the balance of 343, 9771. further left to the Treasury, the net total of 59,000,0001. remained for conversion into a unified general debt. To the first of the three categories into which the aggregate of 80393,000l. was thus divided, Messrs. Goschen and Joubert proposed to leave its old 7 per cent. interest, but reduced its rate of redemption from 100 to 80 ; to the second, in view of the special value of its security, they gave 5 per cent. interest ; and for the large third they also retained the old 7 per cent. interest, reduced only by 1 per cent.—to be applied as a special sinking-fund—till the expiration of the Moukabala at the end of 1885. The obvious objection in equity to this manipulation of the various classes of debt was—that while it docked 20 per cent. off the redemption rate of the three short loans, it not merely placed the totally unsecured Treasury bondholders on a level with the funded creditors, but gave the former a premium of 10 per cent. over the latter for no equitable reason whatever. It was subsequently urged, indeed, that it was necessary to buy off French opposition with this sop ; but this can hardly have been so, as the holders of the Treasury bonds were in much worse plight than the secured creditors—with whom, besides, the Khedive desired to make a preferential arrangement—and had everything to lose with nothing to gain, by impeding the only settlement that could give market value to their paper. The best-informed opinion, both in London and Cairo, also doubted the ability of the Egyptian exchequer to pay 7 per cent. on 59,000,0001. out of a reduced revenue of about 7,750,000l. —even assuming that with the Moukabala and railways a gross total of 10,500,0001. can be maintained—and was, therefore, in favour of a reduction of interest to a uniform 5 per cent. on all but the short loans. The Khedive him. self shared this estimate of his own resources, but finally yielded to the arguments of Messrs. Goschen and Joubert and the diplomatic pressure behind them, and by a decree dated November 18, 1878—which now forms the " organil law " of Egyptian finance—substituted their scheme for the abortive measure of May 7.

But, although the settlement thus effected may be open to objection on the ground of too favourable treatment of the Treasury bondholders at the expense of the funded creditors, and divides opinion as to the rate of interest on the unified debt, the merits of the scheme on the whole outweigh its defects. Thus, in view of the loss of income in 1886 by the expiration of the Moukabala and the Village Annuities, and the diminution in the land-tax which will then result, it was necessary to provide for such a gradual reduction of the charge on the unified debt as will balance it with the available revenue of that year; and this has been done in a manner which is at once ingenious and, on the whole, equitable. Simply a proportionate measure of sacrifice is imposed on all concerned. In re-turn for the retention of their old interest and sinking funds, the holders of the short loans are made to surrender 20 per cent. of their redemption rate, equivalent to 800,0001. of capital; the Treasury bondholders give up 8,400,0001. of their indefensible premium of 25 per cent. under the decree of May 7 ; the holders of the Preference Stock, by accepting 5 instead of 7 per cent. on 15,000,0001., forego 300,0001. a year ; while the deduction for eight years of 1 off 7 per cent. on the unified debt docks 590,0001. a year from the interest on that stock—the whole representing an annual sacrifice of 1,128,000l., which the Government, in its turn, renders possible by taxing its re-sources to the uttermost to pay the high rate of interest imposed on the chief mass of its debt. The calculated effect of these various contributions, plus the yearly in-creasing balances of the Moukabala after payment of the short loans, will be that by the end of 1885, when this terminable revenue expires the unified debt will have been reduced by the process of redemption from 59,000,0001. to 40,000,000l., and the annual charge on it from 4,170,000l. in 1877, to 2,900, 000l. in 1866. As, however, besides the Moukabala and the Village Annuities about 2,000,000l. of land-tax will also then be lost to the Treasury, the reduction thus ingeniously effected will not be sufficient ; and unless the deficit be met by an increase of revenue (which is possible, but not certain) there will be nothing for it but to accept then what had better been accepted now-a uniform interest of 5 per cent. all round.

That this contingency may be equably contemplated, happily results from the guarantees which—far above the mere arithmetical details of the measure -constitute its real value to all classes of Egyptian creditors. These are in fact not merely as theoretically perfect, but also, so far as experience has yet shown, as practically efficient as any obligations imposed on an absolute Government could well be ; and it is but fair to record that the credit of them be-longs quite as much to the spontaneous initiative of the Khedive himself as to the diplomacy of Messrs. Goschen and Joubert. Already, before they had formulated their scheme, his Highness had affirmed its principle as regards guarantees in the two decrees of May 2nd and 7th, and announced his readiness to increase the securities there given to any extent, compatible with his sovereignty, that the bondholders might themselves propose ; and when the November project was laid before him, he at once accepted the improved administrative machinery by which it farther safeguarded the interests alike of the creditors and of the tax-paying population, for in fact this part of the scheme is almost equally advantageous to both. These guarantees now consist :

1. Of two English and French Controllers-General, of whom one is Controller-General of Receipts, and the other of Audit and the Public Debt. The functions and powers of the first of these comprise the collection of all the revenues of the State, and their payment into the several special chests to which they are allocated ; and for this double purpose he is invested with full authority over the tax-collectors, nor can any direct tax be levied unless sanctioned by his counter-signature of the tax paper—a provision that effectually protects the peasants from the arbitrary exactions of the old régime. Similarly, the Controller-General of Audit exercises supreme check over the account-keeping of the Treasury and all the public offices into which any revenue is paid ; and as a security that the Budget estimates of the year shall not be exceeded, his counter-signature is necessary to all de partmental cheques or orders for payment. These two functionaries, whose appointment in the first instance is for five years, form, along with the Minister of Finance, a Finance Committee which controls all contracts involving pecuniary engagements exceeding one-twelfth of the Budget credits of the year, or which would be applicable to more than one year. Both of them are directly responsible to the Khedive, and to him alone.

2. Of a Commission of the Public Debt, also composed of foreigners, recommended, or whose appointments are acquiesced in, by their respective Governments. The duty of this body—which is declared permanent until the whole debt is redeemed—is to receive from the Controller-General of Receipts, and remit to the Bank of England and the Bank of France, the revenue hypothecated for the payment of the debt annuities, and to may out the provisions for its amortisation. And

3. Of a Commission for administering the railways and the port of Alexandria. This body consists of two native, one French, and two English members, under the presidency of one of these last. The foreign members are appointed for five years certain, and the whole Commission is declared permanent until the Preference debt secured by these revenues is redeemed. This railway and port administration has (under the Khedive) paramount working power over the two services, and pays the revenue received from both directly into the chest of the Commissioners of the Public Debt.

Nor is this all. By Article IV. of the decree of May 2nd, which forms a substantive part of this amended measure, these powers of the Debt Commissioners are specifically placed under the protection of the new tribunals, whose jurisdiction over the Ministry of Finance, "in so far as regards the guardianship of the guarantees of the debt," is there affirmed ; thus subjecting the Government itself to an authority which is quite as independent, and relatively very nearly as powerful, as our English Court of Chancery.

The value of such checks on administrative abuse or bad faith cannot well be over-stated, and the settlement of which they are essential conditions—whatever be its defects in other points of detail—may be said to form a foundation for Egyptian credit that will compare favour. ably with that of any second-rate State in Europe. It has, indeed, this one theoretical element of weakness—that it depends on the good faith of an absolute Prince, who has power to shatter the whole by an arbitrary act. But, as has been influentially remarked, that act would have to be performed overtly, in defiance of the public opinion of Europe and of the Powers whose good offices the Khedive has invoked to aid him in carrying out these reforms ; and the present ruler of Egypt is far too intelligent a man to forget that while his relations to the Porte remain as they are he cannot thus wisely defy either. Engagements whose faithful observance is as much a matter of policy as of honour run little risk of violation ; and if so, the early rehabilitation of Egyptian credit may be regarded as certain. But the reader will not have failed to perceive that the guarantees which ensure this are equally good for all classes of the debt. The Controllers - General and the Commissioners of the Publie Debt are common bailees for the whole, and arbitrary interference with their functions in regard to any one of them would be equally fatal to the credit of all three. The only difference, therefore, between the Preference and unified stocks is—that while the revenue which se-cures the former may be regarded as absolutely sufficient to pay its charges, that which is pledged to the latter may not, in very possible contingencies, suffice to meet its much higher rate of interest. The obvious way to equalise the value of the two stocks would be to lower this last to a figure at which its special securities would be equally certain to cover its annuities, and nearly a consensus of opinion points to a uniform rate of 5 per cent. as that which would both satisfy all the equities and be within the power of Egypt to pay in almost any event. That her creditors prefer an assured 5 to a relatively uncertain 7 per cent. was shown by the eagerness with which the Preference bonds were taken up, and is still evidenced by the wide margin of market value between the two stocks. Of course, if experience bears out Messrs. Goschen and Joubert's anticipations of revenue, there is no reason why the Cairo Government should not be held to its bargain ; but the hope is at least a sanguine one that the humane and law-respecting administration now at work will realise as much as was courbashed and tortured out of the fellahs by the late Moufettish. It would have lessened the risk, therefore, of another shock to Egyptian credit if the recent settlement had fixed the whole interest at 5 per cent. all round except—on the short loans—with the provision either for its increase to a higher rate if the Debt Commissioners found the revenue could afford. it, or for the application of any surplus to a reduction of the debt. Still, the administrative safe-guards which now protect their interests afford holders of the unified stock ample assurance that if the country can pay 7 per cent, they will get it, and that if it cannot they will receive 6, 5, or 4,—a certainty that gives an element of value to their stock which it never possessed before. The power of the Controllers-General, too, over the assessment and collection of the taxes will protect the peasantry from the ruinous exactions which oppressed them under the old system ; while the share of the same officers in framing the Budget, and subsequently controlling the departmental expenditure, should equally operate as a check on every branch of the administration, and pre-vent the illicit growth of a new floating debt, pregnant with fresh embarrassment and real dangers for the future. If this prove so, the Government itself, quite as much as its creditors, may be congratulated on a measure which whether the unified 7 per cent. stand or be reduced—undoubtedly constitutes a valuable reform.

Thus, while the cost of the Suez Canal and an excessive outlay on public works-which in a few years, however, will be nearly all remunerative—coupled with bad management and other wasteful expenditure, have contributed to bring Egypt perilously near to the brink of national bankruptcy, a fair review of the country's resources, and of the new administrative reforms, suggests confidence, not merely in the power, but in the firm purpose of its present Government, to retrieve its financial position and honestly pay its debts, notwithstanding the scandalously usurious terms on which many of these have been incurred.