Part 15

The interest on the Preference stock was reduced from 5 to 3½%, and on the Domains from 5 to 4¼%. As regards the Daïra loan, there was no apparent reduction in the rate of interest, which remained at 4%, but the bondholders received £85 of the new stock for every £100 of the old. The capital of the debt was increased by £1,945,000 by these conversions, while the annual economy to the Egyptian government amounted at the time of the conversion to £E.348,000. Further, an engagement was entered into that there should be no reimbursement of the loans till 1905 for the Preference and Daïra, and 1908 for the Domains. By an arrangement concluded in June 1898, between the Egyptian government and a syndicate, the unsold balance of the Daïra estates was taken over by the syndicate in October 1905, for the amount of the debt remaining, when the Daïra loan ceased to exist. The fund formed by the accumulation of the economies resulting from the conversion of the Privileged, Daïra and Domains loan was known as the Conversion Economies Fund. The fund could not be used for any purpose without the consent of the powers, and the money paid into it was invested by the Caisse in Egyptian stock. The fund therefore acted as a very expensive sinking fund, the market price of the stock purchased being above par. Up to 1904 the consent of the powers to the employment of this fund for any purpose of public utility was withheld. On the 31st of December of that year the fund amounted to £E.6,031,000. It may be added that besides the General Reserve Fund and the Conversion Economies Fund, there existed another fund called the Special Reserve Fund. This was constituted in 1886 and was chiefly made up of the net savings of the Egyptian government on its share of the annual surpluses from revenue. Of the three funds this last-named was the only one at the absolute disposal of the government. The whole of the extraordinary expenditure of the Sudan campaigns of 1896-1898, with the exception of £800,000 granted by the British government, was paid out of this fund--a sum amounting in round figures to £1,500,000.

An era of prosperity.

Notwithstanding all the hampering conditions stated, the prosperity of the country became more manifest each succeeding year. During the four years 1883-1886, both inclusive, the aggregate deficit amounted to £E.2,606,000. In 1887 there was practical equilibrium in the budget, in 1888 there was a deficit of £E.53,000. In 1889 there was a surplus of £E.218,000, and from that date onward every year has shown a surplus. In 1895 the surplus exceeded, for the first time, £E.1,000,000. The growth of revenue was no less marked. "In 1883--the first complete year after the British occupation--the revenue was slightly under 9 millions. This sum was collected with difficulty. The revenue steadily rose until, in 1890, the figure of 10 millions was exceeded. In 1897 a figure of over 11 millions was attained. Continuing to rise with ever-increasing rapidity, a revenue of close on 12 millions was collected in 1901 and 1902, in spite of the fact that during the latter of these two years the Nile flood was one of the lowest on record. In 1903 the revenue amounted to 12½ millions, and in 1904 the unprecedented figure of £E.13,906,000 was reached."[7] Yet during this period the amount of direct taxation remitted reached £E.1,900,000 a year. Arrears of land tax to the extent of £E.1,245,000 were cancelled. In indirect taxation the salt tax had been reduced by 40%, the postal, railway and telegraph rates lowered, octroi duties and bridge and lock dues abolished. The only increase of taxation had been on tobacco, on which the duty was raised from 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.

The cost of internationalism.

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.

Egypt gains financial liberty.

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:--

Guaranteed 3% £7,849,000 Preference 3½% 31,128,000 Unified 4% 55,972,000 Domains 4¼% 1,535,000 ---------- Total £96,484,000

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.

AUTHORITIES.--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); _Reports on the Finances of Egypt_, by the British agent, yearly from 1888; _Convention ... relative to the Finance of Egypt, signed at London, March 18, 1885; Khedivial decree of the 28th November 1904; Compte général de l'administration des finances_, issued yearly at Cairo. Consult also the works of Lord Cromer, Lord Milner, and Sir A. Colvin cited under § History, last section. (E. Go.; F. R. C.)

_The Egyptian Army._

Early history.

The fellah soldier has been aptly likened to a bicycle, which although incapable of standing up alone, is very useful while under the control of a skilful master. It is generally believed that the successes gained in the time of the Pharaohs were due to foreign legions; and from Cambyses to Alexander, from the Ptolemies to Antony (Cleopatra), from Augustus to the 7th century, throughout the Arab period, and from Saladin's dynasty down to the middle of the 13th century, the military power of Egypt was dependent on mercenaries. The Mamelukes (slaves), imported from the eastern borders of the Black Sea and then trained as soldiers, usurped the government of Egypt, and held it till 1517, when the Ottomans began to rule. This form of government, speaking generally, endured till the French invasion at the end of the 18th century. British and Turkish troops drove the French out after an occupation of two years, the British troops remaining till 1803. Then Mehemet Ali, a small tobacconist of Kavala, Macedonia, coming with Albanian mercenaries, made himself governor, and later (1811), by massacring the Mamelukes, became the actual master of the country, and after seven years' war brought Arabia under Egypt's rule. He subdued Nubia and Sennar in 1820-22; and then, requiring a larger army, he obtained instructors from France. To them were handed over 1000 Turks and Circassians to be trained as officers, who later took command of 30,000 Sudanese. These died so rapidly in Egypt from pneumonia[8] that Mehemet Ali conscripted over 250,000 fellahin, and in so arbitrary a fashion that many peasants mutilated themselves to avoid the much-dreaded service. The common practice was to place a small piece of nitrate of silver into the eye, which was then kept tightly bandaged till the sight was destroyed. Battalions were then formed of one-eyed men, and of soldiers who, having cut off their right-hand fingers, were made to shoot from the left shoulder. Every man who could not purchase exemption, with the exception of those living in Cairo, Alexandria and Suez, on becoming 19 years old was liable nominally to 12 years' service; but many men were kept for 30 or 40 years, in spite of constant appeals. Nevertheless the experiment succeeded. The docile, yet robust and hardy peasants, under their foreign leaders, gained an unbroken series of successes in the first Syrian War; and after the bloody battle of Konia (1832), where the raw Turkish army was routed and the grand vizier taken prisoner, it was only European intervention which prevented the Egyptian general, Ibrahim Pasha, from marching unopposed to the Bosphorus. The defeat of the Turkish army at Nizib (Nezeeb or Nisib), in the second Syrian War (1839), showed that it was possible to obtain favourable military results with Egyptians when stiffened by foreigners and well commanded. Ibrahim, the hero of Konia, declared, however, that no native Egyptian ought to rise higher than the rank of sergeant; and in the Syrian campaigns nearly all the officers were Turks or Circassians, as were several non-commissioned officers. In the cavalry and artillery many of the privates were foreigners, numbers of the janissaries who escaped the massacre at Stamboul (1832) having joined Mehemet Ali's army.

In the reign of Abbas, who succeeded Mehemet Ali, the Egyptian troops were driven from Nejd, and the Wahhabi state recovered its independence. The next viceroy, Said, began as an ardent soldier, but took to agriculture, and at his death (1863) 3000 men only were retained under arms. Ismail, on succeeding, immediately added 27,000 men, and in seven years was able to put 100,000 men, well equipped, in the field. He sent 10,000 men to help to suppress a rebellion in Crete, and conquered the greater part of the (Nile) Sudan; but an expedition of 11,000 men, sent to Abyssinia under Prince Hasan and Rateb Pasha, well equipped with guns and all essentials, was, in two successive disasters (1875 and 1876), practically destroyed. The education of Egyptians in continental cities had not produced the class of leaders who led the fellahin to victory at Konia.

Ismail's exactions from the Egyptian peasantry reacted on the army, causing discontent; and when he was tottering on the throne he instigated military demonstrations against his own government, and, by thus sapping the foundations of discipline, assisted Arabi's revolution; the result was the battle of Tell el-Kebir, the British occupation, and the disbandment of the army, which at that time in Egypt proper consisted of 18,000 men. Ismail had collected 500 field-guns, 200 Armstrong cannon, and had created factories of warlike and other stores. These latter were conducted extravagantly, and badly administered.

Reorganization.

In January 1883, Major-General Sir Evelyn Wood, V.C., was given £200,000, and directed to spend it in raising a fellahin force of 6000 men for the defence of Egypt. He was assisted at first by 26 officers, amongst whom were two who later became successively sirdars--Colonel F. Grenfell, commanding a brigade, and Lieutenant H. Kitchener, R.E., second in command of the cavalry regiment. There were four batteries, eight battalions, and a camel company. Each battalion of the 1st infantry brigade had three British mounted officers, Turks and Egyptians holding the corresponding positions in the battalions of the 2nd Brigade. The sirdar selected these native officers from those of Arabi's followers who had been the least prominent in the recent mutiny; non-commissioned officers who had been drill-instructors in the old army were recalled temporarily, but all the privates were conscripted from their villages. The earlier merciless practice had been in theory abolished by a decree based on the German system, published in 1880; but owing to defective organization, and internal disturbances induced by Khedive Ismail's follies, the law had not been applied, and the 6000 recruits collected at Cairo in January 1883 represented the biggest and strongest peasants who could not purchase exemption by bribing the officials concerned. The difficulties experienced in applying the 1880 decree were great, but the perseverance of British officers gave the oppressed peasants, in 1885, an equitable law, which has been since improved by the decree of 1900. General considerations later caused the sirdar to allow exemption by payment of (Badalia) £20 before ballot. This tax, which is popular amongst the peasantry, produced in 1906 £E.150,000, and over £250,000 in 1908. This is a marked indication of the increasing prosperity of the fellahin. A portion of the badalia is expended in the betterment of the soldier's position. He is no longer drafted into the police on completing his army service, but goes free at the end of five years with a gift of £E.20. The sirdar is allowed, moreover, to use £20,000 per annum of the badalia for the improvement of the education of the rank and file. As an experiment the police is now a voluntary service, except in Alexandria and Cairo, for which cities peasants are conscripted for the police under army conditions. The recruiting superintending committee, travelling through districts, supervise every ballot, and work under stringent rules which render systematic bribery difficult. The recruits who draw unlucky numbers at 19 years of age are seldom called up till they are 23, when they are summoned by name and escorted by a policeman to Cairo. To prevent substitution on the journey each recruit wears a string girdle sealed in lead. The periods of service are: with the colours, 5 years; in the reserve, 5 years, during which time they may be called up for police service, manoeuvres, &c. The pay is £E.3, 14s. per annum for all services, and the liberal scale of rations of meat, bread and rice remains as before in theory, but in practice the value of pay and food received is greatly enhanced. So also with the pension and promotion regulations. They were in 1882 sufficiently liberal on paper, but had never been carried into effect.

The efforts of 48 American officers, who under Gen. C. P. Stone zealously served Ismail, had entirely failed to overcome Egyptian venality and intrigue; and in spite of the military schools, with a comprehensive syllabus, the only perceptible difference between the Egyptian officer and private in 1879 consisted, according to one of the Americans, in the fact that the first was the product of the harem, and the second of the field. Marshal Marmont, writing in 1839, mentions the capacity of the Egyptians for endurance; and it was tested in 1883, especially in the 2nd Brigade, since its officers (Turks and Egyptians), anxious to excel as drill-masters, worked their men not only from morn till eve, but also by lamplight in the corridors of the barracks. On the 31st March 1883, ten weeks after the arrival of the first draft of recruits, about 5600 men went through the ceremonial parade movements as practised by the British guards in Hyde Park, with unusual precision. The British officers had acquired the words of command in Turkish, as used in the old army, an attempt to substitute Egyptian words having failed owing to lack of crisp, sharp-sounding words. As the Egyptian brigadier, who had spent some years in Berlin, spoke German fluently, and it was also understood by the senior British officers, that language was used for all commands given by the sirdar on that special parade. The British drill-book, minus about one-third of the least serviceable movements, was translated by an English officer, and by 1900 every necessary British official book had been published in English and Arabic, except the new Recruiting Law (1885) and a manufacturing manual, for which French and Arabic editions are in use. The discipline of the old army had been regulated by a translation of part of the Code Napoleon, which was inadequate for an Eastern army, and the sirdar replaced it by the British Army Act of 1881, slightly modified, and printed in Arabic.