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 P.T. 14 to P.T. 20 per kilogramme. At the same time the house duty, with the consent of the powers, had been imposed on European residents. The fact that during the period under review Egypt suffered very severely from the general fall in the price of commodities makes the prosperity of the country the more remarkable. Had it not been for the great increase of production as the result of improved irrigation and the fiscal relief afforded to landowners, the agricultural depression would have impaired the financial situation. In this connexion it should be stated that during 1899 the reassessment of the land tax, a much-needed reform, was seriously taken in hand. The existing assessment, made before the British occupation, had long been condemned by all competent authorities, but the inherent intricacies and difficulties of the problem had hitherto postponed a solution. After careful study and a preliminary examination of the land, a scheme was passed which has given satisfaction to the landowning community, and which distributes the tax equitably in proportion to the fertility of the soil. The reassessment was completed in 1907.

While the country thus prospered it also suffered greatly from the restrictions imposed by the system of international control. This system produced a great disproportion between the sums available for capital and those available for administrative expenditure. Although the money for

public works could be obtained out of grants from the General Reserve Fund, there was no fund from which to provide a sufficient sum to keep those works in order. Moreover, to avoid having to pay half the amount received into the General Reserve Fund the government was compelled to keep certain items of revenue and expenditure out of the accounts altogether—a violation of the principles of sound finance. Then there was the glaring anomaly of allowing the Conversion Economies to accumulate at compound interest in the hands of the commissioners of the Caisse, instead of using the money for remunerative purposes. The net result of internationalism was to impose an extra charge of about £1,750,000 a year on the Egyptian treasury.

All these cumbersome restrictions were swept away by the khedivial decree of the 28th of November 1904, a decree which received the assent of the powers and was the result of the Anglo-French agreement of April 1904 (see § History). The decree did not affect the inability

of Egypt to tax foreigners without their consent nor remove the right of Turkey to veto the issue of new loans, but in other respects the financial changes made by it were of a radical character. The main effect was to give to the Egyptian government a free hand in the disposal of its own resources so long as the punctual payment of interest on the debt was assured. The plan devised by the London Convention of fixing a limit to administrative expenditure was abolished. The consent of the Caisse to the raising of a new loan was no longer required. The Caisse itself remained, but shorn of all political and administrative powers, its functions being strictly limited to receiving the assigned revenues and to ensuring the due payment of the coupon. The nature of the assigned revenue was altered, the land tax being substituted for those previously assigned, that tax being chosen as it had a greater character of stability than any other source of revenue. By this means Egypt gained complete control of its railways, telegraphs, the port of Alexandria and the customs, and as a consequence the mixed administration known as the Railway Board ceased to exist. Moreover, it was provided that when the Caisse had received from the land tax the amount needed for the service of the debt, the balance of the tax was to be paid direct to the Egyptian treasury. The Conversion Economies Fund was also placed at the free disposal of the Egyptian government. The General Reserve Fund ceased to exist, but for the better security of the bondholders a reserve fund of £1,800,000 was constituted and left in the hands of the Caisse to be used in the highly improbable event of the land tax being insufficient to meet the debt charges. Moreover, the Caisse started under the new arrangement with a cash balance of £1,250,000. The interest of the money lying in the hands of the Caisse goes towards meeting the debt charges and thus reduces the amount needed from the land tax. The bondholders gained a further material advantage by the consent of the Egyptian government to delay the conversion of the loans, which under previous arrangements they would have been free to do in 1905. It was agreed that there should be no conversion of the Guaranteed or Privileged debts before 1910 and no conversion of the Unified debt until 1912. Such were the chief provisions of the khedivial decree, and in 1905, for the first time, it was possible to draw up the Egyptian budget in accordance with the needs of the country and on perfectly sound principles.

In the system adopted in 1905 and since maintained, recurring and non-recurring expenditure were shown separately, the non-recurring expenditure being termed “special.” At the same time a new General Reserve Fund was created, made up chiefly of the surpluses of the old General Reserve, Special Reserve, and Conversion Economies funds. This new fund started with a capital of £13,376,000 and was replenished by the surpluses of subsequent years, by the interest earned by its temporary investment, and by the sums accruing by the liquidation of the Daïra and Domains loans. During 1905 and 1906 about £3,000,000 was paid into the fund through the liquidation of the Daïra loan. From this fund, which had a balance of over £12,000,000 in 1906, is taken capital expenditure on remunerative public works in Egypt and the Sudan, and while the fund lasts the necessity for any new loan is avoided. The greater freedom of action attained as the result of the Anglo-French declaration of 1904 enabled the Egyptian government to advance simultaneously along the lines of fiscal reform and increased administrative expenditure. Thus in 1906 the salt monopoly was abolished at a cost to the revenue of £175,000, while the reduction of import duties on coal and other fuels, live-stock, &c., involved a further loss of £118,000, and an increase of over £1,000,000 in expenditure was budgeted for. The accounts for 1907 showed a total revenue of £E.16,368,000 and a total expenditure of £E.14,280,000, a surplus of £E.2,088,000. The annual growth of revenue for the previous five years averaged over £E.500,000. About one-third of the annual revenue is derived from the land tax; customs and tobacco duties yield about £3,000,000, and an equal or larger amount is received from railways and other revenue-earning departments. The chief items of ordinary expenditure are tribute and debt charges, the expenses of the civil administration, of the Egyptian army (between £500,000 and £600,000 yearly), of the revenue-earning departments and of pensions.

It will be convenient here to summarize the position of the Egyptian debt at the close of 1905, that is at the period immediately following the liquidation of the Daïra loan. In a previous table it has been shown that under the Law of Liquidation of 1880 the total debt was £98,640,000. In 1883, the first complete year after the British occupation, the capital of the debt—then exclusively held by the public—was £96,457,000. In 1885 the Guaranteed loan, the nominal capital of which was £9,424,000, was issued, and in 1891 the debt reached its maximum figure of £106,802,000. At that period the charge for interest and sinking fund was £4,127,000. On the 31st of December 1905 the total capital of the debt was as follows:—

The charge on account of interest and sinking fund was £3,709,000. Thus the capital of the debt in 1905 stood at almost the exact figure it did in 1883, although by borrowing and conversion operations nearly £17,000,000 had in the meantime been added to the capital. This reduction was brought about by surplus revenue, and by the operation of the sinking fund in the case of the Guaranteed loan, while £15,729,000 had been wiped out by the sale of Daïra and Domains property. These figures do not, however, indicate fully the prosperity of the country, for although the nominal amount of the capital was practically identical in 1883 and 1905, in the latter year the Egyptian government or the Caisse held stock (bought with surplus revenue) to the value of £8,770,000. The amount of debt in the hands of the public was therefore only £87,714,000, that is to say £8,743,000 less than in 1883, while the interest charge to be borne by the taxpayer of Egypt was £3,378,000, being £890,000 less than in 1883. The charge amounts to about 40% of the national expenditure. On the other hand, Egypt is not now weighed down with a huge warlike expenditure. There is no navy to support, and the army costs but 7% of the total expenditure.

—A concise view of the financial situation in 1877 will be found in J. C. McCoan’s Egypt as it is (London n.d.). Mr Cave’s report is printed in an appendix. The subsequent history of Egyptian finance is told in the following blue-books, &c.:—Correspondence respecting the State Domains of Egypt (1883); Statement of the Revenue and Expenditure of Egypt, together with a List of the Egyptian Bonds and the Charges for their Services (1885);