By the beginning of the last quarter of the 19th century, Egypt still relied on foreign specialists’ assistance to resolve its public debt problems. It ultimately led to the loss of both economic and political sovereignty. Three commissions were created to regulate the situation, two of which were not successful. The third is still active, however, due to the wrong policy of the Egyptian authorities, the external debt continues to increase.
From 1876 to 1880, three commissions were created to solve Egypt’s financial issues, one of which is still in force. In 1976, the British and the French jointly developed a scheme, which implied “division of the debt into four separate categories” (“Egypt, 1850—1882” 131). Groups of the debt varied in terms of payment and interest rates, and their repayment was assigned to successful sectors of the economy using their revenues. However, by 1880, Egypt could not support payments from the state budget, so two foreign committees were formed to receive direct revenues from the sectors (“Egypt, 1850—1882” 131). The measure was ineffective, as the Land Tax was low due to irrigation difficulties in 1877 and increased military spending to help Anatolia in the Russo-Turkish wars.
From 1878 to 1880, the Commission of Inquiry operated, which was also unsuccessful. To close the gap, it was proposed that “estates belonging to the rest of the royal family be used as security for a new loan and their income used as extra-budgetary support” (“Egypt, 1850—1882” 132). It was also suggested to equalize Land Tax to increase revenue from the agricultural sector. However, the measures did not suit either the Egyptian government or foreign creditors, which led to the formation of a third commission, which is still active.
The Commission of Liquidation was formed in 1880 and was aimed at settling financial relations between Egypt and its creditors. The proposed measures included lowering the interest rate as well as increasing the revenue of the agricultural sector. However, the scheme assumed a “steady expansion of European (mainly British and French) control over Egypt’s finances” (“Egypt, 1850—1882” 133). Widespread European intervention in the country’s economy caused discontent among both citizens and wealthy landowners, which led to the emergence of the nationalist movement of 1881-1882 (“Egypt, 1850—1882” 133). Despite the expansion of the agricultural sector and then the industrial sector, Europeans’ presence only expanded due to the provision of loans and mortgages to landowners.
Unlike Egypt, Anatolia managed to avoid European political control, but not an economic one. The Ottoman Public was created in 1881 Debt Administration (PDA) supported by three foreign banks (“Anatolia and Istanbul” 195). The main goal was to use the agricultural and industrial sectors to repay external debts, as well as hidden European penetration into the country’s economy. Until 1903, the government did not have any share in the revenues collected by the PDA (“Anatolia and Istanbul” 196). Thus, European control over finances expanded through the control over the income of the main sectors of the economy, as well as the provision of loans on harsh terms. Despite a series of reforms and a resistance movement, by 1914, the Turkish government was still economically dependent on foreigners.
Egypt’s external debt has continued to increase since 1970, which led to renewed foreign assistance for the country’s economy. However, the government uses the received support to “finance their budget deficits rather than investments” (“The External Debt Problem” 3). In my opinion, the rapid increase in debt began in 2015 and continues to the present moment because the Egyptian government seeks to cover existing obligations and not invest in developing the country’s economy. Thus, current economic growth rates are not sufficient to cover foreign loans, which again leads Egypt into a debt trap.
Works Cited
Owen, Roger. “Anatolia and Istanbul, 1881—1914.” The Middle East in the World Economy 1800-1914, edited by Roger Owen, I. B. Tauris, 2002, pp. 189–215.
Owen, Roger. “Egypt, 1850—1882: from foreign borrowing to bankruptcy and occupation.” The Middle East in the World Economy 1800-1914, edited by Roger Owen, I. B. Tauris, 2002, pp. 122-152.