Printed papers on the political situation and military policy in Egypt [‎44r] (87/176)

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134. Judged by the standards to which Europe has become accustomed of recent
}ears, a deficit involving an addition of approximately half a million to the national
debt is no great matter. In Egypt the prospect was serious, since it seemed that for
the first time for forty years the Egyptian Government might fail to pay its way, in
spite of the great accession of wealth brought to the country during the war. As will
appear, the actual financing of the daily requirements of the State threatened to
present serious difficulty, and an issue o£ bonds for the purpose had to be contem
plated. If this situation had materialised, it would have had a most damaging effect
upon the credit of Egypt at a crucial time in her existence, when Europe generally
is asking whether she can still be relied upon to meet her obligations and to avoid
depreciation of her currency.
135. Since the instalments of the land tax are arranged so as to fall due princi
pally after the cotton harvest, it is usual in Egypt for expenditure to outrun revenue
in the earlier months of the financial year, the balance being readjusted in the late
autumn. Since it is obviously undesirable, on the one hand, to keep funds idle or, on
the other, to sell investments merely to tide over a temporary shortage, it has been
customary to look to the National Bank of Egypt to finance such deficits during the
year’s working should they arise.
136. In the opening months of the expired financial year (1921-22) it was
anticipated that an overdraft might be required in the summer of an amount that
would overstrain the unaided resources of the National Bank and probably make
recourse to an issue of Government bonds unavoidable. Happily this danger was
averted. The overdraft on the National Bank averaged £ E. 5.000,000 during August
and September, which, although a considerable sum, was well within the available
resources of the bank. Then the tide began to turn, and what had been perhaps the
most difficult period in the history of modern Egyptian Government finance was
successfully passed.
137. By the end of the financial year the situation was clearly re-established,
though the liabilities of the war period cannot yet be considered as finally discharged.
This prompt financial recovery was only rendered possible by the natural recuperative
power of the country, which is in the position of a world farm that has accumulated
wealth, and continuk in a position to acquire it, by the supply of a unique standard
of a necessary article. A particularly strenuous effort, however, was required on
the part of the Government to right its position, and great credit is due both to the
Minister of Finance, Ismail Pasha An Ottoman title used after the names of certain provincial governors, high-ranking officials and military commanders. Sidky, who has given proof of much ability and
pertinacity, and to the Financial Adviser and the senior British staff of the Ministry.
Three main lines of action were adopted by the Ministry of Finance with this
objective. The gravitv of the situation as it appeared in March 1921 was not dis
guised or minimised, and the full liabilities of past action, particularly of the excess
purchases of cereals and coal, so far as then known, were faced and published. This
was the essential foundation upon which to build recovery. The Government then
set itself to the double task of cutting down expenditure and of adding to or
expanding sources of revenue. The former was principally effected during the pre
paration of the estimates, a process of the greatest difficulty, since there were so many
important unexpired liabilities from the previous period of affluence in addition to
the two major ones mentioned above. It was valuably supplemented during the
actual course of the financial year by a rigid insistence upon the ever-present
necessity of saving, and by abandoning the insidious practice of readily granting
supplementary credits, which had grown up during the war. The total saving thus
effected in expenditure was £E. 969,000.
138. The following additions to revenue were received during the year from
new or expanded sources :—
£E.
(i.) Egyptian Labour Corps Pension Funds given by His
Majesty’s Government and representing half their
share of the profits of the Cotton Control
Commission ... ••• ••• ••• 960.000
(ii.) Additional taxation or fees—
{a.) P.T. 20 per kilog. on tobacco ... ... 605,000
(b.) Increase in registration fees ... .•• 162,000
(c.) Excise on alcohol ... ••• ••• 172,000
(d.) Corresponding addition to import duty ... 90,000
Totalling ... ••• ••• 1,989,000
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