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Rh parts”) of the Ottoman public debt to be borne by Bulgaria, Servia, Greece and Montenegro, which according to the Treaty of Berlin were to be adjudged by the representatives of the Great Powers at Constantinople, one of whom (the Russian) never succeeded in obtaining his instructions, and which therefore have never been fixed; and, finally, the excess of revenue resulting from a revision of the commercial treaties. The ceded revenues, exclusive of ths “contributive parts” and the excess from commercial treaties, were estimated by Bourke, in his report to the bondholders on the decree of Muharrem, at £1,812,562 (£T1,993,818). A substantial reduction however, had to be made in favour of the 5% “priority bonds,” which were bonds issued to the local banks before mentioned in satisfaction of their claims, and formed an annual first charge of £T590,000 on the whole of the revenues ceded to the bondholders; the capital amount of the “priority bonds” was £T8,169,986, which was to be extinguished by 1906. Four-fifths of the net product of the revenues, after deduction of the first charge of £T590,000, was to be applied to the service of the interest on the new reduced debt, and provided that the four-fifths were sufficient to allow the distribution of 1% interest, one-fifth was to be devoted to sinking fund; but this latter fifth was to be reduced, if necessary, by an amount sufficient to maintain the rate of interest at 1%. The interest on bonds amortized was to be added to the funds available for sinking fund. The sinking fund was to work as follows: First ¼% on the whole reduced capital was to be applied to group i.; if there were any surplus this was to be applied to group ii., until that also received the same full ¼%, and so on for group iii. and group iv., until the whole sinking fund amounted to 1% on the reduced capital. It was to be applied by redemption at the best price possible on the market, until that price stood at £T66.66, when, if the rate of interest served were 1%, it was to proceed by drawings; if the interest were anything more than 1%, and less than 3%, the limit of price for redemption was to be raised to £T75; if the interest were between 3% and 4% inclusive, the limit was to be raised to par. Any surplus of revenue beyond that necessary to provide 4% interest and 1% sinking fund was to be handed over to the government. The lottery bonds receive a special treatment both in regard to interest and sinking fund; full information as to the intricate arrangements made for these bonds will be found in the decree of Muharrem and the published reports of the council of administration of the Ottoman public debt. In 1890 the sinking fund was increased by the conversion of the “priority loan” into a 4% loan and the extension of the term of its redemption for 15 years. In this manner an annuity of £T159,500 was set free, of which £T11,000 per annum was allotted as “extraordinary sinking fund” to series A and £T49,500 per annum each to series B, C and D; the lottery bonds were originally excluded from this arrangement, and special compensation was granted to these later. Each series receives the benefit of the interest on bonds belonging to it amortized by this special annuity. Thus, in the financial year 1900–1901 the total amount of the fund had risen from £T159,500 to £T231,500.

The arrangement set forth in and sanctioned by the decree of Muharrem on the whole worked admirably. Gradually, however, it became apparent that it would be desirable to give Turkish state securities, of which those governed by the decree of Muharrem formed the principal part, a better standing in European financial markets than was possible for bonds bearing so low a rate of interest; to obliterate thus, as far as possible, the effects of the past bankruptcy; and, further, to give the Turkish government a joint interest with the bondholders in the progress of the ceded revenues. The French bondholders, who hold by far the largest proportion of Turkish securities, took the principal initiative in this matter, and, after protracted negotiations with the Turkish government and the other “syndicates” of bondholders, they succeeded, in 1903, in obtaining the following modifications of the original decree of Muharrem.

Series B, C and D (series A having already been completely redeemed by the action of the sinking fund) were replaced by the creation of new 4% bonds to a nominal amount of £T32,738,772, with a sinking fund of 0.45% per annum, bearing identical rights and privileges, and ranking immediately after, the priority bonds. The rates at which the series were respectively exchanged against the new unified bonds were £100 series B against £70 unified, £100 series C against £42 unified and £100 series C against £37, 10s. unified. Bonds of the old series not presented for exchange within a period of fifteen years are prescribed. The amortization is to proceed by purchase when the unified bonds are below par, and when at or above par, by drawings. Coupons and drawn bonds not presented within six and fifteen years respectively of their due dates of payment are prescribed. Interest on amortized bonds goes to swell the sinking fund. When the net product of the ceded revenues amounts to £T2,157,375, the surplus is divisible as to 75% to the Turkish government and 25% to the public debt administration. A variation from this was provided as soon as the priority bonds should become extinct; but these bonds having since been repaid (as mentioned below) by a further issue of unified bonds, this variation lapses. The above 25% is to be employed as additional sinking fund for the unified debt and lottery bonds, in the proportion of 60% and 40% respectively. A reserve fund was created of which the nucleus was the sum already standing

to the credit of the “Reserve fund for increasing the rate of interest” (£T1,113,865), plus £T300,000 at least in cash by the issue of sufficient unified bonds to produce that amount and the sum of £T150,000 to be paid by the government to the public debt at the rate of £T15,000 per annum. It should be added that the total issue was made sufficient to reserve also £T1,460,000 for expenses, after taking into account £100,000 in cash paid by the government to the public debt administration out of the said issue. The reserve fund was created primarily to make good any deficiency in the revenues below the amount required to pay the interest due. If such drafts upon the reserve fund become necessary, they are to be made good in the following years out of the surplus above mentioned. The reserve fund is increased by the interest it may earn, but when the capital amount of the fund reaches £T2,000,000 the interest earned is merged in the general receipts of the public debt administration. As soon as the unified debt is reduced to £T16,000,000 the reserve fund is to be reduced to £T1,000,000, the surplus over this last amount being paid to the government. The unified bonds and coupons are exempt from all Turkish taxation existing or to come. Further special stipulations regarding the Turkish lottery bonds were made, but these are, as before, omitted. They will be found in art. x. of the “Annex-Decree” of September 1–14, 1903, which gave the modifications to the Muharrem decree here described force of law. Finally the Imperial Ottoman government reserved to itself the right of paying off the whole unified debt at par at any moment, and all the dispositions of the decree of Muharrem not modified by the new “Annex-Decree” were formally confirmed and maintained. In 1906 a further modification took place in the shape of the final and complete repayment of the priority bonds by the additional issue of £T9,537,000 of unified bonds for the purpose, taken firm by the Ottoman bank at 86. The rate at which the exchange was effected was par with a cash bonus of 6%. The previous annuity required for the service of these bonds having been £T430,5O0, and the additional charge for the service of the unified debt as a result of the operation being £T424,396, while the government received £T1,272,600 in cash for its own purposes, there was a slight immediate advantage to be found in it: as, however, the priority debt would have been completely extinguished in 1932, the financial wisdom of the change is not apparent.

The ceded revenues administered directly by the public debt council have shown remarkable expansion, and may be fairly looked upon as exemplifying what would occur in the general revenues of the empire when good and honest administration and regular payment of officials finally took the place of the carelessness, corruption and irregularity which existed up to the change of régime. The council has not limited its duties to the collection of the revenues placed under its administration, but has taken pains to develop commercially the revenues capable of such development. A large and remunerative export trade in salt to India is now established, whereas formerly not one grain found its way there; the first steps in this direction were taken in 1892 when works were begun to place the great rock-salt salines of Salif, on the coast of the Red Sea, on a commercial footing. The gross receipts from this export trade amounted in the year 1908–1909 to £T99,564, and the profits approximately to £T12,000, in spite of the contest between Liverpool and Spanish salt merchants on the Calcutta market, which led to a heavy cutting of prices. Pains, moreover, have been taken by the public debt council to develop the sale of salt within the empire. These efforts have been rewarded by the increase of the salt revenue from £T635,000 in 1881–1882, the year preceding the establishment of the council, to £T1,075,880 in 1907–1908. Again, in the early years of the administration (1885), the Pasteur system of selection of silk-worms' eggs for the rearing of silk-worms was introduced, and an “Institute of Sericulture” on modern lines was erected (1888) at Brusa for gratuitous instruction in silk-rearing to students from all parts of the empire. Up to the end of 1907–1908, 919 students had received the diploma of the institute, and 465 silk-growers in addition had passed through the course of instruction. These men, returning to their various districts, impart to others the instruction they have received, and thus spread through the regions adapted to sericulture the proper methods of selection and rearing. As a result some 60,000,000 mulberry trees were planted in Turkey during 1890–1910, involving the plantation of about 130,000 acres, and new magnaneries and spinning factories sprang up in every direction; while the revenue (silk tithe) increased in the regions administered by the council from £T17,000 in 1881–1882 to