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Inclosure in No. 5.
Memorandum by Mr. Edward Dicey on the Domains Question, and the Crédit Foncier of Egypt.
THE Egyptian Government contend, firstly, that the lands hypothecated to the Domains Loan are not worth anything like their estimated value, and represent a total inferior to the amount of the loan; secondly, that the large and increasing deficit on the Domains Loan interest is due mainly to a faulty system of administra- tion, and might be abolished, or, at all events, largely reduced, if the Domain lands could be taken out of the control of the trustees by whom they are administered under the terms of the loan contract.
On the other hand, the bondholders-as represented by Messrs. Rothschild—are satisfied with the securities they hold for their advances, and absolutely decline to part with these securities, except in consideration of the repayment at par of their advances, either in whole or in part.
Given these conditions, it follows that any project by which the Egyptian Government can hope to regain the control of the Domain lands must of necessity involve an immediate loss to the Egyptian Treasury, though it may be contended that this loss would be much more than counterbalanced by the consequent increase in the revenue of the 'ands set free by purchase.
Whether it is wise or unwise for the Egyptian Treasury to incur a small immediate loss for the sake of a large prospective gain is a question for the Egyptian Government to decide. But if they are not prepared to submit to some loss at the outset, they have no choice except to acquiesce in the continuance of the existing arrangements.
Supposing, however, the Egyptian Government are prepared to make a pecuniary sacrifice in order to set the Domain lands free, they can only effect their purpose by providing the funds requisite to pay off the Domain Loan at par, either in whole or in part.
Now the Egyptian Government have no funds at their own disposal available for this purpose.
There is no reasonable prospect of the funds required for this object being provided either directly or indirectly by the British, or any other Government. In consequence, if the funds required are to be provided at all, it must be by the aid of fresh loans advanced by private capitalists.
As a matter of fact, neither European nor native capitalists are likely to be found ready to advance the amount required to pay off the whole of the Domain Loan, or any large portion of it, at once. Such an operation, which would always be attended with great difficulties, is utterly out of the question in the present unsettled and unsatisfactory position of Egyptian affairs. If, therefore, any attempt is to be made at all to deal at present with the Domains question, the attempt must be made on a limited and tentative scale.
For instance, private capitalists might possibly be found prepared to advance the sum of, say, 1,000,0007., and prepared to accept, as security for this advance, a second mortgage on the various securities already hypothecated to the Domain Loan.
In virtue of this advance, the Egyptian Government would be placed in a position to purchase from the Commissioners of the Domains a million's worth of Domain lands at the scale of prices agreed upon between the Egyptian Government and the Commissioners in 1883.
This repurchase must obviously entail an immediate loss on the Egyptian Treasury. In the first place, the money required to purchase these Domain lands being borrowed on security er hypothesi inferior to that hypothecated to the Domain Loan, must necessarily be raised at a higher rate of interest than that on which the Domain Loan was borrowed. In the second place, the lands in question would have to be purchased at their estimated value at which they stand hypothecated, a value which is considerably in excess of their actual market price. It must, however, be borne in mind that an exactly similar objection holds good against any possible scheme for the redemption of the Domain lands. The crucial difficulty of the whole question lies in the fact that the amount borrowed on the Domain lands is far in excess of their saleable value, and this difficulty has to be faced if any serious attempt is to be made to pay off the Domain Loan either in whole or in part.
Ôn the other hand, if the contentions of the Egyptian Government are even approximately correct, any loss accruing from the purchase of the Domain lands in
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