Mr. Beardsley to Mr. Fish.
Cairo, August 26, 1874. (Received September 17.)
Sir: Notwithstanding the fact that the subject of Egyptian finances has been almost constantly under discussion in the financial journals of Europe during the past six months, it is difficult to arrive, even now, at a correct knowledge of the true state of the Egyptian treasury, or to decide as to the desirability of Egyptian obligations as securities. On the one hand there is a lack of official and trustworthy information on the subject, and a general belief in extravagance on the part of the Egyptian government and of mismanagement on the part of the minister of finances; while on the other hand no one doubts the great resources of the country, nor the feasibility, with ordinary good management and economy, of rendering Egyptian obligations among the safest and most desirable in the market. In fact, until a year ago, they stood among the best of foreign investments in the money markets of Europe, and the £32,000,000 loan was launched upon the market last July by the government, with perfect faith in its success.
It was, as you well know, a complete failure as a popular loan, and was only partially disposed of to the Oppenheims at 25 per cent, discount. The causes of this failure were various. On the eve of the loan certain parties in Egypt, for reasons chiefly personal, represented the financial condition of the country as very bad, and the national debt as being an enormous burden, too heavy for the resources of Egypt to bear. Reports of the grossest extravagance and most reckless management were circulated here and found echo in the commercial and financial journals of England and Europe. There were no counterstatements in response to these charges. The government, apparently taken by surprise, was totally unprepared to defend its financial administration, and it realized too late the error of a policy which left its creditors without official information concerning the financial condition of the country. The result was a general panic in Egyptian securities of all kinds, and the government, having depended upon the proceeds of the loan for means to meet its obligations, found itself in a most critical and embarrassing position. It was, moreover, just at the moment of the general crisis which disturbed the equilibrium of the financial world, which of itself would have rendered the success of the loan sufficiently doubtful. Altogether the result was, for the time, disastrous to the financial condition of the Egyptian government. The best Egyptian securities depreciated 20 per cent, in value in a few weeks, and the new loan could not be disposed of at any price, except to private banking-houses on most usurious conditions.
The government, however, met all its obligations, and came through the crisis better than might have been hoped for. It moreover set to work to enlighten the world as to its financial condition and to give an account of its operations during the past ten years. Retrenchment in the public expenditures was inaugurated; many public works were suspended; extraordinary and unnecessary outlets to the national treasury were closed up; many sinecures were abolished; increased taxation was applied to the country, and altogether a new and healthy régime was inaugurated. Confidence in the solvency and good faith of the Egyptian [Page 1200] government bas gradually returned and the reaction has set in, as is manifested by an advance of from 10 to 15 per cent, in her bonds.
With a bonded debt of nearly $250,000,000, nearly four-fifths of which has been created during the past ten years, it is desirable that the financial world should know how such an enormous debt has been created in so short a time of profound peace and the probable solvency and resources of the country.
With this object in view, various statements bearing on the subject have been made during the past six months, some of them official by the government and others emanating from private individuals, some of which bear evidences of official inspiration. Some of the figures contained in these exhibits are rather remarkable, and the fact seems to be pretty well established by them that the resources of Egypt, actual and prospective, and the general character of its government, circumstances, and population, are such as to justify the amount of indebtedness referred to above; and further, that a fair proportion of this debt has been incurred for purposes of productive expenditure and in developing resources which in the ultimate resort form the bases of the security held by the Egyptian creditor.
I inclose herewith a pamphlet on the finances of Egypt, by an anonymous author, which gives the most satisfactory history of the various Egyptian loans that has appeared. The author also explains the difference between the national loans, secured by the national revenues, and the Daira (or the Khedive’s private treasury) loans, secured by the Khedive’s private estates, and shows that the latter loans form no part of the public debt of Egypt. He also reviews the financial and commercial history of the country during the past ten years, examines the budget issued last year by the ministry of finance, and finally arrives at the general conclusion, “that not only is the recent artificially produced distrust in Egyptian securities unwarranted by any change in the substantial grounds of the country’s credit, but that, relatively to the interest they yield, there are absolutely no other bonds known to the stock exchange which offer equal security to investors.”
The government loans amounted originally to:
|Loan of 1862, first loan||£3,292,800|
|Loan of 1864||5,704,200|
|Loan of 1866, railway loan||3,000,000|
|Loan of 1868||11,890,000|
|Loan of 1873||32,000,000|
This amount has been reduced to about £49,572,000 by the operation of the sinking-fund, which amount now represents the entire indebtedness, with the exception of such balance of the floating debt as may remain in excess of the proceeds of last year’s loan. This debt has been incurred in eleven years, and the question is, what has been done with it! An official answer is given to this question in a document appended to the pamphlet, in the form of a summary statement of the receipts and expenditures for the ten years ending September, 1873, published by the Khedive’s government.
This statement shows that the revenues of Egypt steadily increased from £4,813,970 in 1864 to £10,571,048 in 1873, and that the proceeds of the loans raised during the entire term amounted to £26,949,000, (only £11,700,000 of the last loan having been realized in September, 1873.) Seventy-one million one hundred and fifty-three thousand seven hundred and twenty pounds were received as taxes and direct revenues, making an aggregate of receipts in the ten years of £98,102,720. On [Page 1201] the other hand, the expenditure during that period was £112,561,784; leaving a deficiency in the shape of floating debt amounting to £ 14,359,064.
Among the items of expenditure daring the ten years the following are conspicuous:
|Tribute to Constantipole, Egypt||£6,066,700|
|Home and administrative expenses||38,603,066|
|Payments on the loans||16,339,537|
|Construction of railroads||9,653,327|
|Suez Canal, direct and indirect expenses||10,377,131|
|Harbor and dry-docks at Suez||1,151,101|
|Harbor and dry-docks at Alexandria||1,238,587|
|Improvement of steam, postal, and commercial service||2,304,406|
|Cost of an iron-clad presented to the Sultan||289,421|
|Cost of Sir Samuel Baker’s expedition||474,063|
|Cost of light-houses on Egyptian coast||165,750|
|Cost of city improvements at Cairo and Alexandria||1,390,135|
The nature and extent of the public works undertaken and prosecuted by the Egyptian government during the past decade, as well as the increased resources and prosperity of the country, was represented at considerable length in my last annual report, forwarded with my dispatch No. 126, of September 15, 1873.
The budget of the Egyptian government for the year 1873–74 is also appended to the pamphlet which I herewith inclose. I had the honor to forward the same document, with a summary of the same, with my dispatch No. 145, of October 24, 1873. The Estimate of the budget is: Receipts 9,741,656 Egyptian pounds, and expenditures 8,645,329 Egyptian pounds, leaving a surplus of 1,096,328 Egyptian pounds; the Egyptian pound being equivalent to about five dollars.
A revenue of £10,000,000 is relied upon for the future, which, if realized, ought to leave a goodly balance in the treasury to meet the charges on the floating debt, &c, if ordinary economy is practiced in the administration of the country.
I will continue the subject of Egyptian finances in a future dispatch.
I am, &c,