CHAPTER X

THE DUAL CONTROL

NOVEMBER 1879-DECEMBER 1880

Working of the Control-Relations between the two Controllers-And between the Controllers and the Egyptian Government-Delay in paying the Tribute-Interest on the Unified Debt paid at 4 per cent-Financial scheme proposed by the Controllers-The Budget for 1880-Reforms in the fiscal system-Confidence inspired by the Control-Reports on the state of the country-The Law of Liquidation-The military danger.

ON November 30, 1879, I wrote to Sir Edward Malet, who had been appointed Consul-General in Egypt: "On the whole, I think the start has been favourable. If we can only sit tight for six months, I believe we may pull the thing through. But I devoutly hope that there will be no change of Ministry, or any unexpected event, such as often happens in the East, to upset everything and to oblige a new beginning to be made. Time, and a stable political situation,-these were the two principal conditions which were essential to success. Only the first of these conditions was, to a very limited extent, fulfilled.

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The Ministry of Riaz Pasha lasted for nearly two years, and an acute observer who was on the spot subsequently wrote that "with all its faults it was the best administration which Egypt has enjoyed before or since." 1

1 Khedives and Pashas, p. 134. say, before the reforms introduced had produced much result.

This was written in 1884, that is to subsequent to the British occupation

The main reasons why the machine of Government worked fairly well for a time were twofold.

In the first place, the best relations existed between the two Controllers. In the second place, a modus vivendi was found between the Controllers and the Egyptian Government.

It has been mentioned in the previous chapter that before the Controllers-General were appointed, some discussion took place as to how the work should be divided between them. Eventually, M. de Blignières and I were left to settle the matter between ourselves. The solution which we adopted was a simple one. We never attempted to solve the question at all. We were in constant communication with each other, and we worked in common. Any precise definition of our respective functions would have been difficult, and was quite unnecessary.

It was a more difficult matter to establish friendly relations with the Egyptian Government. Riaz Pasha was thoroughly honest and well-intentioned, but he was incapable of dealing unaided with the perplexing financial questions which at that time presented themselves for solution. He saw the necessity for European assistance, but, at the same time, in whatever form it was given, it was distasteful to him. He was himself a reformer, and had courageously protested against the abuses of Ismail Pasha's time, but he was slow to accept the inevitable conclusion that no reforms were possible without European guidance and assistance. Qui veut la fin veut les moyens, formed no part of Riaz Pasha's political creed. It was clear that, under these circumstances, the best hope of success lay in the Controllers submitting themselves to a selfdenying ordinance. They would have to pull the strings behind the scenes, but appear on the stage as little as possible.

Another essential requisite to success was that both the Egyptian Ministers and the Egyptian people should see that the Controllers were of some use to them. Duty and justice alike pointed to the necessity of standing as a buffer between the Egyptian Government and their creditors. The Ministers had neither the strength to oppose the pressure which, in European interests, was brought to bear on them, nor the knowledge requisite to resist it with effect. The policy adopted by M. de Blignières and myself was to associate ourselves, as much as possible, with the Egyptian Government, and to defend them against any excessive demands and encroachments on their rights. By adopting this line of conduct, we hoped soon to inspire confidence, and gradually to disabuse the minds both of the Ministers and of the Egyptian people of the prejudices which were entertained against Europeans. If once we could inspire confidence, our advice, we thought, would generally be followed, and our influence could be used to the benefit both of the country and of the creditors.

Opportunities for giving effect to these principles were not slow to present themselves. Heavy instalments of the Tribute, as also the half-yearly interest on the Unified Debt, had to be paid. Money was not forthcoming to meet these engagements. M. de Blignières and I had not yet arrived in Egypt. Our advice was requested by telegraph. The Egyptian Government flinched at the responsibility of committing an act of insolvency. They asked us whether they ought to borrow money in order to meet their engagements. The reply could not be doubtful. If the Tribute could not be paid, so much the worse for the Tribute. The same was to be said as regards the interest on the Unified Debt. The main thing was, once and for all, to abandon the ruinous

expedients of the past. The employés of the Government must, in the first instance, be paid; then the Tribute, whenever there was money enough to pay it. As for the Unified Debt, the taxes should on no account be taken in advance. If, when the interest fell due, the revenues pledged to the service of the debt were insufficient to meet the whole charge, a dividend should be distributed.

The letter which we wrote from Paris on this subject was published. One result of our advice was that the Tribute due to the Porte remained unpaid for some little while. A further result was that the full interest on the Unified Debt was never paid. The amount due on November 1 was £1,989,000. The rate of interest fixed by the Decree of November 18, 1876, viz. 6 per cent, had not as yet been legally changed. When the 1st of November arrived, only £1,147,000 was in the hands of the Commissioners of the Debt. Interest at the rate of 4 per cent was distributed to the bondholders.

Directly after we arrived in Egypt, another step of importance was taken. Difficulties were being encountered in arranging for a Commission of Liquidation to make a final settlement of Egyptian financial affairs. In the meanwhile, both the country and the creditors were suffering. We therefore recommended the Egyptian Government to cut the diplomatic knot by preparing their own scheme, which could be submitted to the Commission of Liquidation, if one were appointed, and which could be put into operation without the sanction of any law, in the event of no agreement being arrived at as regards a Commission. suggestion was accepted, and, in concert with the Egyptian authorities, we proceeded to prepare a scheme.

The

On January 1, 1880, we submitted our report

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to the Khedive. "Experience," we said, "has shown that the main defect of all former attempts to regulate the Egyptian financial situation has been that they have been too optimistic." It was essential to steer clear of that danger. The Commission of Inquiry had recommended that the interest on the Unified Debt should be fixed at 5 per cent. M. de Blignières and I thought that rate too high. We recommended that only 4 per cent interest should be guaranteed. The public had become accustomed to the idea that the rate of interest would have to be reduced to 4 per cent. When our proposals were made known, so far from producing a bad effect, Unified Stock rose from 51 to 56. A sum of £1,684,000 was due to the bondholders for back interest on coupons which had only been partially paid. "We cannot," we said, "hold out the least hope that these sums will ever be paid."

We

The next thing was to frame a Budget for the year 1880. The Commission of Inquiry had estimated the Egyptian revenue at £9,067,000. We considered this estimate too high. reduced it to £8,562,000. A sum of £4,323,000 was required to pay the Tribute and to carry on the administration of the country, thus leaving £4,239,000 available for the creditors of the Egyptian Government.

The reforms proposed by the Commission of Inquiry were at the same time taken in hand. On January 6, 1880, the law of the Moukábala was repealed. On the 18th, an additional tax of £E.150,000 a year was placed on the Ouchouri lands. On January 17, the poll-tax was abolished. It yielded a revenue of £205,000 a year. Persons whose sole employment was agriculture were, at the same time, relieved from the payment of the professional tax. Octroi duties, highway,