The tale of three public debt crises in Tunisia, Egypt, and the Ottoman Empire in the 1860s and 1870s

ABSTRACT

The paper provides a comprehensive comparison of the experiences of debt accumulation and of the debt crises which took place within less than a decade during the second half of the nineteenth century in Tunisia, Egypt and the Ottoman Empire. The comparison covers the period from the 1850s to the 1880s, as the three countries were attempting to modernize and meet the challenges posed by the industrial revolution and the European expansion globally. They quickly faced financial constraints, increased their external borrowing and ran into crisis. These crises, which were triggered from 1867 to 1876, were part of the second wave of crises during the nineteenth century. The countries differed considerably in the way the crises were managed and resolved. In this context, based on available information, the paper provides a quantitative assessment of the debt burden and the various indicators of creditworthiness using constructed series on total GDP for the three countries for the period 1860–1884. This allows for a comparison of the full processes of debt accumulation, the triggering of the crises and their resolution. In doing so it brings together a wealth of data and information about the factors which impacted creditworthiness and capacity to service debt, relating to trade and fiscal revenues, which played a major role in determining the severity of the crises and the way they were resolved.

KEYWORDS:

• public debt crisis
• debt resolution
• debt restructuring
• Egypt
• Ottoman Empire
• Tunisia

Acknowledgements

This paper benefited greatly from the work of Coşkun Tunçer as well as fruitful exchanges with him, and comments and suggestions from anonymous referees.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 With the exception of a slight depreciation of the Tunisian rial with respect to gold in 1867.

2 Starting in 1860/1861 import duties in the Ottoman Empire were increased to 8%, to 11% in 1907 and 15% in 1915.

3 The estimates of GDP for Egypt by Yousef (2002) are deemed too low and are not used.

4 The implicit assumption is the stability of the ratio of the PPP exchange rates to the current exchange rates.

5 The figure for population in Tunisia is that retained in Nabli (2022) based on best available evidence, even though there is controversy on the issue.

6 Compared to those of Tunçer (2021), the data on yields for Tunisia are adjusted for the period after June 1872, to take into consideration a different value of the coupon on the ‘new unified debt’ (25 francs instead of 35).

7 Using all available evidence on growth in the relevant periods.

8 According to this estimate the Ottoman Empire excludes Romania, Egypt and the Arabian Peninsula.

9 This implies that estimated population series does not take into consideration territorial losses, such as in 1878, when Romania, Serbia and Bulgaria became independent. Natural population growth accelerates from 0.4% per year during the 1860s to 0.85% during the 1980s.

10 Pamuk estimates GDP per capita at 8 ottoman liras in 1880 and 12 in 1913, or a 50% increase.

11 Our estimate of the average total GDP in 1880–1882 is 135.8 million British pounds, or 150 million Ottoman liras, to be compared with an estimate by Pamuk (2006) of 160 million Ottoman liras.

12 The early borrowing was mostly personal loans by the Khedive. Part of the debt accumulated in Egypt since 1858 was to finance the construction of the Suez Canal.

13 Interestingly a small bond issue by the Ottoman Empire in 1877 to fund the Russian war, in the middle of crisis, was guaranteed by the ‘Egyptian tribute’ payment to the Empire.

14 The Vice-President is a high level French civil servant, who presented a restructuring plan which would be considered best-practice today.

15 Khaireddine Pacha was a well-known reformer and non-corrupt political figure, who became prime minister in 1873, replacing the previous corrupt one. The Vice-President of the CFI was a French appointed high-level civil servant, who was independent minded and did not get well with the government.

16 Nabli (2022) provides a more detailed analysis of these political economy issues.

17 The Cave report of March 1876 and the Goschen-Joubert report of September/October 1876.

18 The issues were mostly perpetuities.