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about to confer on them the blessings of a constitutional form of government, which they ardently desired. The Khedive had defied two powerful Governments; he had got rid of his European advisers; and he had appointed in their places a number of men who would implicitly obey his orders, and who, albeit free institutions were to be introduced, would have no scruples in acting on the most approved principles of personal government. European Governments might perhaps lecture him, but international rivalry was so intense that no common action of a serious nature was to be feared. He had, indeed, drawn a heavy draft on the credulity of Europe. Even those who were not conversant with Eastern affairs might not unnaturally think that when an Oriental Gracchus complained of sedition his arguments were not to be accepted without some reserve. Nevertheless, the scheme would probably have been successful if the financial plan, which the Khedive had pledged himself to carry out, had been based on any solid foundation. If he had been able to pay his debts, no excuse would have existed for further interference from abroad. Unfortunately for the Khedive, his financial plan was impossible of execution. The entire scheme crumbled to the ground and, in falling, overwhelmed its author.

CHAPTER VII

THE REPORT OF THE COMMISSION

APRIL 1879

Declaration of bankruptcy-Principles of the settlement-The Khedive's Civil List The Ouchouri land-tax-The Rouznameh loan-The law of the Moukábala-Reductions of taxation-Composition with the creditors-Comments on the report-The Commissioners resign-The Khedive's counter-proposals-Revival of the practices of the old régime-The Commissioners of the Debt institute legal proceedings against the Egyptian Government-My departure from Egypt.

DURING all this period, the Commission of Inquiry had been sitting with a view to the preparation of a plan for the settlement of the financial situation. It is unnecessary to enter into all the complicated details of the questions which came under the consideration of the Commissioners. But it will be desirable to state the main conclusions at which they arrived.

The Commissioners began their report1 by stating that the Egyptian Government were bankrupt, and, moreover, that the state of bankruptcy had really commenced on April 6, 1876, on which day the Khedive suspended payment of the Treasury bills falling due. It was true that since that date not only had the interest on the debt been paid, but a sum of £2,645,000 had been devoted to sinking

1 The first draft of this report was prepared by myself. It, of course, underwent a good many modifications before a final text was approved. The French was revised by M. de Blignières.

fund. As As purchases of stock were made in the market at prices varying from 314 to 43, nominal capital to the extent of £4,858,000 had been extinguished. On the other hand, the actual deficits of the two years, 1877 and 1878, amounted to no less than £4,822,000. The floating debt had, therefore, been increased by an amount of £2,177,000 in excess of the money applied to sinking fund. "Payer les coupons, the Commissioners said, "dans ces conditions, c'est distribuer des dividendes fictifs, et l'on sait à quels résultats arrivent les sociétés qui persévèrent dans cette voie. Leur situation paraît brillante jusqu'au jour où la ruine est irrémédiable." In truth, the taxpayers and the creditors had alike suffered from the delay which had occurred in recognising the true facts of the case. The only sound starting-point for the establishment of a better order of things was to be found in facing the facts boldly. "Le pays," M. de Blignières said, "est saigné à blanc.' Measures

such as those which had been heretofore adopted to produce a fictitious appearance of solvency, must be discarded. The annual expenditure must be brought down to the limits of the annual revenue. It was a great point gained that these preliminary truths should be officially recognised by a trustworthy body of Europeans, amongst whom were included the representatives of the bondholders.

Having ascertained beyond doubt that the Egyptian Government could not meet all their financial engagements, the Commissioners proceeded to lay down the principles which should form the basis of a composition with the creditors of the State. It was impossible to do justice to all the interests involved. "Le système de gouverner le pays,' we said, “jusqu'à présent en vigueur a rendu impossible de rendre justice à tous les intérêts engagés. Le seul résultat auquel le nouveau

régime pourra aspirer, c'est de partager l'injustice aussi équitablement que possible."

The Commissioners then laid down three principles.

The first of these was that no sacrifice should be demanded from the creditors until every reasonable sacrifice had been made by the debtors. "On n'a pas," the Commissioners said, "à insister sur l'équité de ce principe." It was, in fact, perfectly just and logical. But in its application, a subsidiary question naturally arose. Who in this case were the debtors? Morally speaking, the real debtor was the Khedive. He had for years past disposed absolutely of the revenues of Egypt. He had contracted the debts without reference to the wishes or true interests of the people over whom, by the accident of birth, he had been called to rule. Unfortunately, he had dragged his people along with him. No moral responsibility whatsoever attached to them, for they had never been consulted as regards the measures which had been taken by the Khedive. But, however hard the conclusion might appear, it was inevitable that they should suffer from the faults of their ruler. Considerations of equity and sound financial policy, however, alike dictated moderation in the application of the principle enunciated above. The people of Egypt would have to make certain sacrifices, but, the Commissioners added, "il serait assurément contraire aux intérêts généraux de leur imposer des sacrifices au-dessus de leurs forces. On verra même dans la suite de ce rapport que nous proposons de leur accorder immédiatement des soulagements sensibles."

The second principle laid down by the Commissioners was that, in deciding on the degrees of sacrifice which should be imposed on the different classes of creditors, it was desirable to conform as

much as possible to the procedure indicated by the Egyptian code as that which should be followed in dealing with the estate of a private individual who was bankrupt.

In the third place, it was necessary that any general arrangement which might be adopted should be made obligatory on all the persons who were interested. The number of creditors was so large, and their claims were of such various natures, that it was hopeless to expect unanimity in the acceptance of any voluntary arrangement. A small minority might, therefore, prevent the adoption of any general scheme. The only way to avoid this inconvenience was to pass a law, which would have to be accepted by all the Powers, and which would thus become binding on the Mixed Tribunals and on all the parties concerned.

Having laid down these principles, the Commissioners proceeded to deal with the personal position of the Khedive.

His Highness had given up most of the estates of the Khedivial family,' upon the security of which a loan had been raised. The proceeds of this loan were about to be applied to the liquidation of the floating debt. It was now necessary to fix the amount of the Khedive's Civil List. "Assurément," the Commissioners said, "au moment de demander de nouveaux sacrifices de la part de ses créanciers, Son Altesse ne voudra pas que ses dotations soient fixées à un chiffre trop élevé." The Civil List was, therefore, fixed at £E.300,000 a year.

The question of the sacrifices to be imposed on the Egyptian taxpayers presented greater difficulties. Three important points had to be

1 The residue which remained over eventually acquired great value. Quite recently, a plot of land in the town of Cairo belonging to some of the Khedivial princes sold for no less than £600,000.

VOL. I

I

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