consequence, public schools have been long established in most considerable Turkish towns, while 'medresses,' or colleges, with public libraries, are attached to the greater number of the principal mosques. But the instruction afforded by these establishments is rather limited. In the medresses,' which are the colleges or schools of the ulemas, the pupils are instructed in Arabic and Persian, philosophy, logic, rhetoric, and morals founded on the Koran; with theology, Turkish law, and a few lessons on history and geography.

Revenue and Expenditure.

The financial affairs of the Ottoman Empire have been in a state of thorough disorganisation, but since 1880 a certain amount of improvement is visible. Although the figures in the budget which were allowed to transpire tended to show a large deficit, variously estimated at from four to eight millions sterling, yet, since November 1880, the Porte has issued no loan and received no permanent advance, with the exception of some 200,000l. during the Egyptian crisis of 1882. We are therefore in presence of a paper deficit. Ottoman financiers have restored the balance of the budget by reducing the pay of both civil and military functionaries far below the amounts which figure in the budgets, and by withholding it in part or entirely.

The following figures give approximately the receipts and expenditure for the financial year 1883-84. They may be taken to represent the closest estimates which can be formed, after inspection of the realised figures of the previous financial periods.

Loans secured on Egyptian Tribute

Cyprus surplus sequestered by France and England for

Loan of 1855.

811,546

5,750

12,036,011

4,187.005

16,223,016

£T 765,000

130,000

230,000,000

1,983,416

An official report from the British Embassy, dated September 1883, estimates the gross revenue at 13,686,0007., and expenditure at 14,089,000Z.

The public liabilities of the Ottoman Empire used to be divided officially into two categories, namely, the Foreign or Hypothecated Debts, contracted, as their designation implies, abroad, and secured on special sources of revenue; and the Internal Debts, known under a variety of names, issued at Constantinople alone, and therefore

dependent only on a compact between the Porte and its subjects, and secured on the general credit and resources of the empire. The following table gives the year of issue, nominal capital, the interest per cent., and the issue price, of the foreign loans of Turkey :

Of the above, those of 1854, 1855, and 1871 were secured on the Egyptian Tribute, payable to Turkey. Since 1874 the Defence Loan of 1877 has been issued, also secured on this Tribute, leaving 209,496,7407. dependent on the direct revenues of Turkey.

By a decree of the Government, dated October 6, 1875, the interest upon the external debt was reduced for a time to one-half of the stipulated amount in money, the other half being represented by Ramazan certificates. Another order of the Government, issued July 9, 1876, announced that no further payments would be made until the internal affairs of the empire had become more settled. In July, 1881, delegates from the bondholders of England, France, Austria, Germany, and Italy met at Constantinople, and effected an arrangement of the debt, which was embodied in the Imperial decree of December 8-20, 1881, and by which the debt was reduced to 106,437,2347. The Government agreed to hand over to a commission, consisting of delegates appointed by the bondholders from the different countries of Europe, the excise revenues of Turkey, to be administered by them, entirely separate from the other Government administrations. The Galata bankers acquiescing in this arrangement, became first mortgagees, and their debt became more marketable. The nominal amount of the loans made by them to the Porte was consolidated into a Privileged Debt of 8,170,000l., and an annual sum of T590,000.

was set aside for the service of this debt, and to form a first charge on the conceded revenues. A license tax has, with the consent of the Great Powers, been established by the Turkish Government, and came into operation early in 1884. The above-mentioned decree of December 8-20 provides for a reduction of the capital and capitalisation of arrears of the Ottoman loans therein enumerated, and authorises a conversion of the whole or part of the debt by the Council of Administration in accord with the Government. The Council consists of six members, representing England, France, Germany, Austria, Italy, and the priority obligations of the Galata bankers, the English representative acting for the Dutch and Belgian bondholders. Article X. of the decree provides for the application of the net produce of the conceded revenues on September 13 and March 13 each year to payment of interest and amortisation of the debt, subject to the preferential deduction from the produce of the six indirect contributions of T590,000l. per annum for the service until their complete extinction of the 5 per cent. privileged obligations, which annuity it is calculated will continue for a period of about 22 years. Article XI. provides for the application of four-fifths of the net revenue of each year (excluding contributions of Servia, Montenegro, Bulgaria, and Greece, and interest on amortised bonds, which, when fixed, will go entirely to amortisation) to the service of interest, provision for 1 per cent. interest on the reduced capital being first made out of the total net revenues; the interest never to exceed 4 per cent. Article XII. provides for the allocation to amortisation of the debt of the remaining one-fifth of the net revenue (exclusive as aforesaid, but augmented by the interest on amortised bonds and subject to provision of the one per cent. interest), such amortisation never to exceed one per cent. per annum on the reduced capital, and any surplus over four per cent. interest and one per cent. amortisation to be paid over to the Treasury.

The first three years of the new debt arrangement have passed satisfactorily for those interested in it. The Council of Administration took over the revenues at the commencement of 1882, and has been in peaceful possession of them ever since. Since September 1882 interest has been paid at the rate of 1 per cent. per annum on the reduced capital value, and the receipts already made are sufficient . to guarantee a similar rate in March 1885. Over 1,200,000l. of the 1858 and 1862 loans have been redeemed by the action of the sinking fund. Both interest and amortisation will increase when the Powers determine the amount payable by Bulgaria, Montenegro, Servia, and Greece, in accordance with the treaty of Berlin. A consolidation of the various loans has been carried on under a twofold form-first, that of registration, second, that of stamping for conversion. By the former, bonds proportionate to the reduction

K K

of the capital of each loan were withdrawn, and the remainder returned with a new coupon-sheet attached thereto; by the latter, the bonds were stamped with a declaration binding them to be converted against the new converted bonds. The actual conversion commenced on November 20, 1884, and is optional for registered bonds, but compulsory for those stamped. The various loans are consolidated in four series, viz. :-Series A, 7,183,8721., representing loans of 1858 and 1862; Series B, 10,241,0487., representing loans of 1860, 1863, and 1872; Series C, 30,832,5117., representing loans of 1865, 1869, and 1873; Series D, 43,968,3967., representing the General Debt.

The following are the details of the arrangement:-After payment of 1 per cent. interest the surplus up to the first per cent. of the capital as reduced to be applied to the amortisation of Series A, and after it of Series B, C, and D successively; the second per cent. to the amortisation of Series B, and then of Series C and D successively, unless already in possession of the first per cent.; the third per cent. to the amortisation of Series C, unless already in possession of per cent., when it will pass to Series D, unless already in possession of 4 per cent., when it will be divided equally between Series C and D; and the fourth per cent. to the amortisation of Series D, unless already in possession of per cent., when the surplus will be divided equally between the Series unextinguished. On the extinction of the three first Series, the available sum to operate for the benefit of the fourth. By the Treaty of Berlin the States of Bulgaria, Montenegro, Servia, and Greece have to bear a portion of the Turkish foreign debt, to be applied, capital as well as interest, to amortisation of all the loans pro ratâ, and, on a conversion being effected, to the redemption of a part of the converted debt. The amortisation to be by purchase or drawing each half-year as decided by the Council of Administration at rates not exceeding (a) 66-66 per cent. of the capital when the interest paid is at 1 per cent.; (b) 75 per cent. of the capital when the interest is greater than 1 per cent., but less than 3 per cent.; (c) 100 per cent. of the capital when the interest reaches 3

or more.

per cent.

Of the other loans, those of 1854 and 1871 are secured in the Egyptian tribute, that of 1855 guaranteed by France and England. The internal debt has not yet been arranged. It is proposed to effect a composition with the holders similar to that which the foreign bondholders have accepted. The amount of the internal debt will, it is anticipated, be found to amount to 20,000,0007.

There is in addition the war indemnity to Russia of 32,000,000l., which by negotiation it has been agreed to pay at the rate of 320,000l. per annum without interest.