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Chapter One

On Finance

2 - The Financial Situation

The Financial Advisor, in his memorandum on the budget for the year 1914, stated the following regarding the general financial situation in Egypt, which I fully agree with: "In my memorandum on the budget for the year 1913, I estimated that the value of the cotton crop for the year 1912 would increase over the value of the previous year's crop, and I predicted this increase to be two and a half million pounds. The result was slightly less than I estimated, as the value of the crop was calculated at 32 million pounds, an increase of 2,140,000 Egyptian pounds over the value of the 1912 crop.

"One might initially think that this increase in the value of cotton exports directly affected the imports of 1913, which increased in value by about two million pounds. However, upon closer examination, it becomes clear that this conclusion is not accurate. This increase in imports is almost matched by the change in monetary flow. This flow, during the cotton season of 1912-1913, resulted in a net outflow of 2,000,000 Egyptian pounds from Egypt. In the previous year, the net inflow was one and a half million pounds. Such an outflow of money exceeding its inflow in Egypt had not occurred before, except in the year 1908-1909, when the value of the cotton crop decreased by seven and a half million pounds compared to its current value.

"Consequently, instead of imports increasing in proportion to the increase in exports, an adjustment occurred in the cotton trade balance, with exports decreasing by one and a half million pounds. This indicates that the borrowing of new funds from foreign countries was limited to an equivalent amount or completely halted.

"It appears from the types of imports that there is a general decrease in food and clothing items, with the exception of grains and flour, the imports of which increased significantly to compensate for the country's crop deficit. The increase in these two categories alone from imports was about 1,200,000 Egyptian pounds. The rest of the increase was due to the rise in prices that Egypt was forced to pay for textiles, coal, petroleum, timber, and other goods."