Ahmet Zühtü Pasha’s Financial Missions in Europe (1873-1877)

Authors : Kemal Doğan

Pages : 61-84

Doi:10.16947/fsmia.1722232

View : 36 | Download : 5

Publication Date : 2025-06-18

Article Type : Research Paper

Abstract :When the Ottoman Empire fell into a severe financial crisis during the Crimean War (1853-1856), it turned to external borrowing. However, as the first loan taken in 1854 failed to cover the war expenses, it borrowed again in 1855. Afterwards, the Ottoman government started to borrow in order to withdraw the unrequited paper money issued in the previous years from the market, to cover the budget deficit and, more importantly, to pay the interest and debt installments of its debts as of 1865. To summarize, 10 years after it started borrowing, the Ottoman government was unable to pay its debts. Thanks to the appetite for easy money in European financial markets, the government continued to borrow at very high interest rates and, beginning from 1865 onwards, the discussion was not about whether it would declare bankruptcy, but when it would declare bankruptcy. In 1873, the stock markets of Europe and the United States suffered a major collapse and the Great Depression of 1873-1896 began, which would later be characterized as the first great crisis of capitalism. In addition, between 1873-1875, the Ottoman Empire suffered a catastrophic famine. It was almost impossible to borrow money from abroad, and therefore to “roll over debt with debt”. Zühtü Efendi, who was the undersecretary of the Ministry of Finance at the time, was hastily dispatched to London to obtain a new loan in order to alleviate the heavy budgetary costs of the rebellions in the Empire’s European territories and the financial burden of the newly started Ottoman-Russian War (1877- 1878).Zühtü Efendi had to find a new reliable collateral for a new loan. To this end, he saw that he could use the collateral that would be freed up by reducing the interest rates on bonds issued in previous years. After reaching an agreement with the bondholders, Zühtü Efendi managed to sign a £5 million loan agreement, known as “the Loan For Protection of the Ottoman Rights”. This article discusses his borrowing adventure. For this purpose, both the Ottoman and the British archives were consulted for financial correspondence and reports from the period. The developments not always documented in the archival records were evaluated with the help of local and foreign newspapers in İstanbul, as well as newspapers published in London. The article, based on previously unused documents and information obtained through this research, aims to contribute to the literature on Ottoman external borrowing.
Keywords : Dış borçlanma, Zühtü Paşa, Şark Meselesi, mali buhran, Osmanlı tahvilleri

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