Cairo- “The basis of management is the system and economy in finance, and I will do my best to follow the rules of the system and the economy, and I have resolved to arrange for myself specific provisions that I will never exceed, and I will aim to consolidate the foundations of justice….”
With these words, Khedive Ismail spoke in his “sermon on the throne”, announcing his ruling program before state agents, after he took over the rule of Egypt on January 18, 1863, but he soon began the journey of borrowing the following year, even though Egypt was not at that time in need to borrow.
Historian Abd al-Rahman al-Rafi’i says in his book “The Age of Ismail” that the issue of debt is the dark side of the era of Ismail, because it is the tragedy that ended with the destruction of the independence building, and the interference of foreign countries in the country’s financial and political affairs.
In his book “The Story of the Egyptian Economy,” economics professor Jalal Amin asserts that if we describe the era of Muhammad Ali as the era of development without debt, then it is possible to describe the era of Ismail as the era of debt without development, “and we mentioned that something very similar to that had Egypt suffered after 100 years of the era of Ismail, when the seventies were associated with debt involvement, with the rapid growth of intervention, without any significant progress in the structure of the productive apparatus, but rather with a noticeable deterioration of it.
Within weeks of the beginning of Ismail’s reign, he invited the Ottoman Sultan Abdul Aziz to visit Egypt, to begin a policy of paying bribes to the Sultan and his entourage to obtain firmans to change the system of inheriting the throne, obtain the title of Khedive and expand his independence.
The website of the Presidency of the Republic says in the section on the former rulers of Egypt, that Ismail “exaggerated in renaissance projects and manifestations of greatness, so he resorted to loans, which led to foreigners interfering in Egyptian affairs, economically and politically.”
The position of the presidency enumerates Ismail’s achievements, pointing out that he transformed the Consultation Council of the Consultative Assembly of Representatives, allowing the people of Egypt to choose the representatives, as well as transforming the bureaus into glasses (ministries) and forming the first spectators to share the responsibility of governance, and took care of agricultural projects and digging the Abrahamic and Ismaili canals, and established many factories Including 19 sugar factories.
The Khedive also paid attention to education and increased the budget of the Ministry of Education, and commissioned Ali Mubarak to draw up a basic law for education, and established the House of Science for the graduation of teachers and the House of Books, and some newspapers appeared during his reign, such as Al-Ahram and Al-Watan.
Galal Amin mentions in “The Story of the Egyptian Economy” that Ismail was not only limited to luxurious palaces, beautifying Cairo, establishing a luxurious opera house, and other manifestations of extravagance on which he spent a lot, but also added 8,400 miles of canals to the irrigation network, 910 miles of railways, and repaired Alexandria port.
Opening of the Suez Canal
The biggest failure in Ismail’s history remains the legendary opening ceremony of the Suez Canal, where Ismail achieved the dream he had long cherished, and opened the canal in a party that gathered the kings and queens of Europe, about 4 thousand guests, in November 1869.
But the big party exhausted the country’s budget, forcing Ismail to sell Egypt’s shares in the canal to England for 4 million pounds, although it was equal to 32 million, opening the door for foreigners to interfere in the country’s affairs.
Cairo University academic Ahmed Abd Rabbo believes that since the opening of the canal, the British influence has controlled Egypt, and it has been pressured to pay its debts. Abdication of his throne in British-French-Ottoman coordination.
Jalal Amin compares Egypt’s borrowing in the seventies of the twentieth century with what happened in the era of Ismail, as spending increased during his reign rather than pressure him, and after 13 years of his rule, that is, in 1876, the year that the Egyptian financial management got out of his control and became in the hands of observers foreigners; Egypt’s foreign debts amounted to 91 million pounds, and the volume of its annual service (the volume of annual installments and interests) was about 6 million pounds, about 80% of the total Egyptian state revenues at that time.
Amin compares the pattern of development in the era of Ismail and the era of the late President Anwar Sadat, who ruled Egypt from 1970 to 1981, focusing on the infrastructure without making any significant change in the structure of the Egyptian economy in favor of industrialization.
As Amin compared between the era of Ismail and the era of Sadat, some compare the debts that Egypt suffered during the reign of Khedive Ismail and the debts that Egypt currently bears during the era of President Abdel Fattah El-Sisi.
Last October, the Central Bank announced that Egypt’s external debt had reached 137 billion and 859 million dollars at the end of the fiscal year 2021/2020, compared to 123 billion and 490 million dollars at the end of the previous fiscal year, as the external debt increased by about 14.4 billion dollars.
A decision by the Central Bank to grant emergency liquidity to banks last week, due to their inability to provide it from the “interbank” market or from other financial markets, raised concern among some, because of what it raises about the possible inability of banks to meet the demands of their customers.
Several months ago, a journalist close to the authority, Imad El-Din Hussein, wrote an article in which he spoke about the danger of the Egyptian foreign debt reaching nearly 130 billion dollars, recalling what happened to Egypt during the reign of Khedive Ismail, and adding, “We have to go back again to what President Abdel-Fattah said. Al-Sisi, who is that we should not borrow unless the matter is urgent and necessary, and suggested that the government stop temporary borrowing so that we study the situation calmly and assess its results and consequences, and I hope that Parliament will not approve any loan unless it is for “the very strong,” as he put it.
confidence in the economy
Supporters of the Sisi regime believe that the regime is expanding in the construction of mega projects, such as the new administrative capital and the development of Upper Egypt and development initiatives that target the poor such as “a decent life”, the development of Cairo and the removal of slums, and that Egypt’s access to loans from the International Monetary Fund gives great confidence in the Egyptian economy and stimulates foreign investment.
While opponents believe that these billionaire projects cost Egypt millions of dollars, and are promoted in the media, such as the procession of royal mummies and the opening of the road of rams, despite international warnings of high rates of inflation, economic stagnation and high interest rates; Consequently, borrowing prices rose globally after the Corona pandemic.
Recently, the Executive Director of the International Monetary Fund, Dr. Mahmoud Mohieldin, stated – in televised statements – that the cost of borrowing is high, and it bears burdens on future generations, and that it is better to encourage the green economy, warning of the conditions of the global economy in light of the pandemic.