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The Ottoman Public Debt Administration (OPDA) in Debt Process of Ottoman Empire”

December 2018

Authors:

Hasan Abdioğlu

Karadeniz Technical University

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The Ottoman Public Debt Administration (OPDA)

in Debt Process of Ottoman Empire

Prof.Dr. Bedriye Tunçsiper

Assist. Prof. Dr. Hasan Abdioglu

Abstract

The Ottoman public debt was a term dated back to 1854, when the Ottoman Empire

contracted its European creditors shortly after the beginning with the Crimean War. The

Ottomans were forced to accept new financial controls. By the well known decree Muharrem

Kararnamesi (December 1881) in return for a reduction of the public debt a European-

controlled organization, the Ottoman Public Debt Administration-OPDA (Duyun-u

Umumiye) was set up to collect certain revenues. Taken in conjunction with the activities of

European-controlled banks and with the tariff limitations imposed on the Ottomans by the

Capitulations, the result was distinct restriction on Ottoman ability to guide the allocation of

its resources.

The OPDA played an important role in Ottoman financial affairs. Also it was an

intermediary with European companies seeking investment opportunities in the Ottoman

Empire. In 1900, OPDA was financing many railways and many other industrial artifacts.

Turn of 1900 century the Ottoman Dept debt burden consumed all Ottoman revenues. The

non Muslim subjects of the Ottoman Empire were protected with the capitulations of the

Ottoman Empire. The Ottoman Muslim subjects paid their taxes to the OPDA and watched

their money move to European capitals.

Keywords: Ottoman Debts, Duyun-u Umumiye, Ottoman Public Debt

Administration

Dean, Faculty of Economics and Administrative Sciences, Balikesir University of Turkey

Bandirma Faculty of Economics and Administrative Sciences, Balikesir University of Turkey

I. Introduction

Economic difficulties began in the second half of the16th century. The changing trade

routes caused the decline of the provinces taking place on the old international trade routes of

the Middle East. This decreasing of sources created an increasing imbalance of trade between

East and West. The Ottoman economy also faced a serious inflation, caused by the influx of

precious metals into Europe from the Americas. As the treasury lost its revenues, state

obligations like salary payments began to be covered by debasing the coinage (devaluation),

increasing taxes, and confiscations. All these worsened the situation particularly for the reaya

and the salaried askeri class. This further weakened the affairs of the “state” because those

depending on salaries tended to corruption. On the other hand inflation weakened the

traditional manufactures. Functioning under strict price and quality regulations, the guilds

were unable to provide goods at prices to compete with the cheap European manufactured

goods. On the other hand, for the sake of the customs revenues of the state there was no

protective policy, lie the mercantilist measures of European states, to restrict the imports. In

consequence, traditional Ottoman industry fell into rapid decline (Yavuz, 2006:1)

The Ottoman public debt was a term dated back to 1854, when the Ottoman Empire

contracted its European creditors shortly after the beginning with the Crimean War. In 1875

the nominal public debt was £200,000,000, with annual interest and amortization payments of

£12,000,000, more than half the national revenue. After 20 years of borrowing following the

Crimean War, the Ottoman government defaulted in 1875 and declared the Decree of

Muharrem in 1881, which led to the establishment of the Ottoman Public Debt

Administration (OPDA). For the creditors, it was a result of a cooperative effort, which

aimed to secure the repayment of foreign loans and to develop a monitoring and enforcement

mechanism for future investments in the empire. The OPDA tied the interests of the

bondholders to those of the administration and maintained coordination among the creditors.

The strong enforcement mechanism created trust in the Ottoman bonds and benefited the

govenment as well. In 1881 Ottoman Public Debt Administration was established by the

European creditors to collect (certain revenues were assigned) the money by the Decree of

Muharrem. In December 1881, the debt was reduced from £191,000,000 to £106,000,000

with governments confession to PDA. Lastly, with establishment of Republic of Turkey in

1929, it was agreed that Republic of Turkey would only pay 67% of the debt, which

amounted to 107.5 million gold liras.

II. Ottoman Empire in the Decline Era

There should, in fact, also be a question mark against the phrase “Ottoman Decline”.

It is not at all certain that such a thing existed. It is equally possible to argue that by the 19th

Century the Ottoman Empire was in a much reduced form. The military and political events

during the decline of the Ottoman Empire covers the era between 1828 to 1908. The period

"Decline" was based on the loss/gain comparison of the Empire. Directly affecting the empire

at this time was Russia's expansion. The political rhetoric was dominated with the economic

problems and national uprisings. Empire tried to catch up to the western world by passing

political and administrative reformations (Shaw & Shaw, 1997:56).

The Ottoman Empire as a semi-colonial state and, gives foreign debts, OPDA and the

growing difficulties of permanent capitulations in addition to a classical type of division of

labour in world economy as the most clear examples of it, and, mentions the role of this chain

for the troubles that have been faced during the struggle against economic captivity. The turn

of the century was reflecting an alteration in the relations among the capitalist states and the

states that lack experiencing bourgeois democratic revolutions. Colonialism, as being

essentially a political and military relationship, was evidentiary in the age of competitive

capitalism, in which, one capitalist state forces another state, which is not sustaining similar

features with the latter, to become dependent to its economy and compel the colonized state

to be its raw material source and end product market, furthermore imperialism as the final

stage of monopolistic capitalism, in which exploitation endures through financial capitalism

composed of banking and industrial capital. Thus, for the international system, imperialism

and its adamantine organ, haute finance; “a sui generis institution functioned as the main link

between the political and the economic organization of the world that supplied the

instruments for an international peace system, which has worked with the help of the

European Powers as a permanent agency with an elastic nature by its contacts between

diplomacy and finance (Boratav, 1998:12).

Additionally, for the Ottoman case the role of haute finance had been solidified by its

iron grip when she defaulted on her financial obligations in 1875 and military conflagrations

immediately broke out, lasting from 1876 to 1878 when the Treaty of Berlin was signed28

and following the Treaty, there occurred a peace that lasted remarkably long in comparison

with the antecedent and the following decades of Ottoman history. Due to its relations with

haute finance and the diplomacy network named Concert of Europe, built by the major

European powers, the Ottoman Empire has never been colonized by a single country but

several had lasting ambitions on her. Instead, as couple of examples, such as 1877-78 Russo-

Turkish War and First World War have revealed, an attempt for this aim brings considerable

controversies among the European Powers. Therefore, foreign influences and their affection

were depending upon the conjuncture and relative efficaciousness of the European Powers.

However, from the general European perception, the Ottoman state was a despotic state as the

exemplar of permissiveness and iniquity which had to be tamed/adjusted as to be a part of the

European system due to its commitment in the Paris Agreement of the 1856. Throughout the

years of decline, economy and technology based transformation reached to America in the

west and to forgo of the Ottoman state in the east. The enlargement of transformation coerced

the downfall. Since the sixteenth century, the perception that Ottoman élite had put forward

by their reports was in a context of a need for returning to the pure form of old social and

economic system that brought the Ottoman state from a tribal organization to empire. Yet, by

the end of the eighteenth century, the exigencies for the necessity to change became explicit.

The Empire had to confront the challenge of rampageous capitalism and its coercive bodies.

For the European Powers, their intentions towards the Empire could be conceived through the

policy rationale of beggar their neighbor. However, the formation of the Empire was a great

military establishment which conquered vast territories in Europe, Asia and Africa until the

seventeenth century.

When the reforming Sultans of the late eighteenth and nineteenth centuries began to

modernize the structures of their ailing state, they gave their attention first to the army, in

order to defend the borders of the Empire. Consequently, military schools and academies

based on the Western model were set up, and out of these institutions emerged a new

generation of reformist officers committed to the salvation of their state. Inevitably, they

became politicized and conspired with high civilian officials who were also coming from the

same new type of schools that have been reorganized or newly established due to the modern

needs of the Empire. Modernization was a need for survival and all that was modern within

the imagination and the reality of the rising Ottoman élite was in the West. The Ottomans

were cognizant of the forces released by the European revolutions and learned that pre-

modern Ottoman political and social structures would not be able to survive the onslaught of

modern societies, but it was a tardy observation. Infidels were far from being at the door.

They had already overcome the Ottomans by their technology in the economic and political

field as well as in the battlefield. Henceforth, in the last quarter of the nineteenth and by the

beginning of the twentieth centuries, the westernization attitude or being a part of the

European civilization sub-jugate the new élite in each and every aspect of the life. Although,

“they were ready to borrow western civilization with both its rose and its torn”33 the torn

already pricked them and the rose was far from being easily attained. In short, the

modernization period in the late Ottoman era was the source of a new man in the streets of

Đstanbul who was in search of new paths to survival for the state which had created him and

which was also the new major topic and subject of him (Balci, 2004:29).

III. Economic Structure in Late Era

The Tanzimat process also led to the reform and modernization of the legal system

and civil bureaucracy as secular legislations in public space were borrowed from Europe. A

wide ranging series of legal reforms, a Napoleonic commercial code among others,

dramatically transformed Ottoman economic and social life, mainly in urban areas. The so

called “reception” movement which initiated secularization in the Ottoman realm included

the adoption of a new criminal code (1840), a compendium of public administration law

(1846), a new commercial code with provisions for Sharia or Religious Law (1850). The

second reform legislation, namely Islahat edict of 1856 proclaimed in the wake of the

Crimean War, permitted the establishment of foreign banks, and the adoption of a new

version of Commercial and Maritime Codes based once again on those of France (1861).

These early moves were part and parcel of a swing towards a secular state and paved a way

for further secularization this time in the private sphere.

Trade with Europe, which had been on the increase since the second half of the

Eighteenth Century, increased rapidly from 1840 onwards and continued to do so until 1873.

Direct investment by Europeans began to grow significantly after the Crimean war (1853),

when the empire was viewed as a land of opportunity and attracted serious business as well as

many adventurers (Zürcher, 2006:3).

Until the development of banks in the middle of the nineteenth century, monetary

activities in the Ottoman Empire laid chiefly in the hands of the Galata Bankers, who were

based in the Galata district of town. These bankers was a group of Ottoman financiers that

had arisen, shortly after the conquest of Istanbul in the fifteenth century, to serve the financial

needs of the government basically on short terms for seasonal ups and downs. They later

offered financial services such as money changing and lending to the Ottoman public. The

Galata Bankers were generally Levantines, Jews, Armenians and Greeks settled mainly in

port cities. Until the seventeenth century, the Jews had been predominant, but thereafter

Armenians, and still more Greeks, who had widespread commercial and shipping contacts

with Europe, played the major role. Their services as intermediaries in monetary transactions

were vital as they evaluated the weights and purity standards of Ottoman money. The coins

issued by the State as part of the process of disguised devaluation lost their intrinsic values

and often did not correspond to their nominal values.

Quasi-paper money, i.e. kaime, issued by the Ottoman Treasury did threaten public

confidence in Ottoman Empire, as it was not backed up by any reserves provided by a central

bank. It was a form of interest-bearing bond or unsecured promissory note issued in small

denominations of 500, 100, and 25 piasters , and was similar to early examples of interest-

bearing European paper money, which were paid a premium upon redemption. Originally,

kaime was issued mainly to cover government short-term debts to Galata bankers. It was

solely a domestic currency and was never widely used outside of capital city, Istanbul.

Foreign trade was carried out in hard currency. The further issuance of kaime constantly

devalued ion it and the agio between hard currency and paper money so widened that

financial collapse of the Ottoman system seemed imminent, this, until foreign loans with

Europe were contracted during the Crimean War to withdraw it from circulation. Foreign

debts brought a new supply of sound, i.e. hard currency in precious metal into the country.

During the Russo-Ottoman War of 1876-78, the government resorted to kaime once again. In

1880, the Ministry of Finance, much recovered from the monetary crisis caused by the War,

enacted a comprehensive monetary reform. To promote monetary stability, and create support

for the Ottoman currency, bimetallism was replaced by a quasi-gold standard. The new

standard “unit of account” became the gold lira. Despite all its inconveniences, the notorious

paper money, which ultimately became irredeemable, was nevertheless an important step in

the monetization of the Ottoman economy as it increased the amount of circulating medium

in the country (Pamuk, 2000:230).

Galata Bankers had traded the promissory notes they received from the government

among one another even before the 19

century. By the 1840s, they actively bought and sold

government notes such as sergi and kaime on an unofficial secondary market, as well as

trading in precious metals and currency. During the Crimean War (1853-56), when the

government began funding its deficit by foreign borrowings which it covered by bound

issues, a new trade in Ottoman Treasury Bonds (Hazine tahvilleri) began. After the Crimean

War, commerce and foreign investment expanded, due, to a large extent, to the rise in

commodity prices during the American Civil War (1861-65). Until the government defaulted

on interest payments in 1875, precipitating a major crisis and leading to a second important

reform period, Ottoman Treasury Bonds were increasingly popular with Ottoman investors,

vying with traditionally favored investments in metals and jewels. Many Europeans also

invested in Ottoman bonds, including a large number of Frenchmen who put their savings in

them, lured by high yields and the assurances of European bankers and politicians. A later

instrument was the private sector bond, used to finance the development of infrastructure in

Istanbul and in other parts of the Ottoman Empire, ranging from Salonica to Beirut. These

bonds were particularly important for railways. Between 1879 and World War I, Ottoman

railroad bonds replaced Government Bonds as the most lucrative investment, although much

of the initial trading was speculative, similar to the American experience with railroad bonds

after the Civil War. Trading in stocks and shares dates back to mid-century and investment in

common stock on the Istanbul Stock Exchange only became widespread in speculative

periods, and was generally limited to professional traders and interested European parties.

The 1870s were a difficult period in Ottoman financial history. The Ottoman

government had contracted excessive debt obligations during the reign of Abdülmecid (1839-

61) and Abdulaziz (1861-75). The government was in such financial straits during Russo-

Ottoman War (1876-78) that it resorted to issuing the notorious paper money, i.e, kaime once

again. When the war was over, the Ottoman government found itself facing debts of 200

million pound sterling and a high war indemnity to the Russians. It defaulted on these debts,

and in 1879 the Ottoman Bank and Galata Bankers stepped in with the so-called Defense

Loan of 9 million pound sterling. In the meantime, as a reminder, the foundations of the

financial services sector in Turkey can be traced back to the moneychangers and Galata

Bankers of Ottoman times before 1847. Until 1847, bankers, who were mostly drawn from

the ethnic minority population in Istanbul, carried out all financial activities. The number of

foreign financial institutions in the Ottoman Empire rapidly increased between the years of

1847 and 1908 (Ozbilgin, 2000:35).

Since the expenditures of the military and the state apparatus far outstripped the tax

collecting ability of an inefficient government, loans were used as a palliative until 1881 to

avoid the harsh necessity of financial reform. The situation did not improve until the 1881

Decree of Muharrem consolidating Ottoman debts and the subsequent creation of the

Ottoman Public Debt Administration (Toprak, 2006:135).

IV. The Ottoman Public Debts in Late Ottoman Era

From the default of October 6, 1875, to the establishment of the Ottoman Public Debt

Administration on December 20, 1881, the Ottoman Empire went through one of the

gloomiest periods of its history. The political situation rapidly worsened: Abdulaziz’s

successor, Murad V, mentally collapsed under the pressure of the events and had to be

removed from the throne only three months after his accession. His brother and successor,

Abdulhamid II, inherited a rather desperate situation with the Empire at war against Serbia

and Montenegro, and the impending threat of a Russian aggression. Despite an attempt at

ingratiating himself with both domestic liberals and the Great Powers by promulgating a

constitution in December, 1876, the new Sultan failed to alleviate the situation. The Russian

threat became a reality in April, 1877, and resulted in the utter defeat of the Empire by the

end of January, 1878. Saved from the humiliating clauses of a peace treaty signed with

Russia by the Congress of Berlin, instigated by western powers, the Ottoman Empire was

nevertheless reduced to the status of a minor power at the mercy of European politics.

The consequences of the bankruptcy of 1875 were harshly felt in every aspect of the

Empire’s administration. The war effort was squeezing every piaster out of the Treasury, and

the government was incapable of meeting its most basic financial requirements, including

salaries to civil servants or to officers. Organizing a foreign loan was strictly impossible

under these conditions, and even the Imperial Ottoman Bank had refused to grant the

government an advance of £T 2,000,000 upon instructions received from the London and

Paris committees. The desperation in which the government found itself forced it to resort

once again to paper-money, despite the provisions of the Imperial Ottoman Bank concession

that forbade them from doing so. Derogation was obtained from the institution, and an initial

sum of 300,000,000 piastres was issued between mid-August and late-December, 1876. Soon

enough, two additional issues of 700,000,000 and 600,000,000 piastres were agreed upon,

thus bringing the total issue to 1,800,000,000 piastres, causing a predictable depreciation of

the paper currency of about 65 percent at the end of two years. By the time redemption was

well under way, in 1880, the kaimes had dropped to 10 to 15 percent of their original value

(Eldem, 2004:442). Abstract of Debts and Liabilities in 1276/1860-1 is as follow (Kiyotaki,

2005:26).

Table 1: Abstract of Debts and Liabilities in 1276/1860-1

(Hobart and Foster’s Report)

Under these dramatic circumstances, it was clear that the Empire would not survive

unless some solution was found to the crisis created by the bankruptcy of 1875. The Imperial

Ottoman Bank, loyal to its role of a state bank, managed to secure a £ 5,000,000 loan—the

Defense Loan—to contribute to the war effort. More importantly, it mobilized its own

resources in order to provide the Treasury with much-needed short-term advances. In the late

1870s, the proportion of advances to the government to the total of advances lent out by the

bank had soared to nearly 90 percent; in other words, the Ottoman Bank was channeling most

of the resources it could have used on the market to satisfy the desperate needs of the

government. True, the interest rates on these advances clearly reflected the risk taken by the

institution, but it nevertheless signified its willingness to sacrifice its commercial activities

for the sake of keeping the Treasury afloat in these hard times

Yet none of these short-term palliative measures would really solve the protracted

crisis caused by the 1875 default. In this respect, too, the Imperial Ottoman Bank took upon

itself to find a satisfactory settlement. The government was still hesitant to engage in a formal

solution of the foreign debt, most of which was constituted of long-term loans. Much more

pressing was the need to solve the problem of outstanding short-term local debts, including

the bank’s, in order to avoid the shutting down of the doors of local financial institutions. In

November, 1879, an agreement was finally reached between the government and its local

creditors, whereby the state would surrender its indirect revenues from the stamp, spirits,

fishing taxes, silk tithe, and salt and tobacco monopolies. The Administration of the Six

Indirect Contributions thus constituted would be managed by representatives of the Ottoman

Bank and other local creditors. To the surprise of most observers, the arrangement proved to

be a success, and proceeds soon proved to be sufficient to meet the charges of the internal

debt. This success, however, ended up creating a feeling of frustration among foreign

bondholders, who felt left out of a successful deal. Pressuring their governments, they

obtained that negotiations be opened for the settlement of the larger question of the foreign

debt. The negotiations started in October, 1880, and eventually led to the signing of the

Muharrem Decree, on December 20, 1881, which foresaw the abrogation of the 1879

arrangement and its replacement by the Administration of the Ottoman Public Debt. In an

effort to meet the demands of all parties, the outstanding debt of the Empire was reduced

from £ 215,500,000 to £ 128,600,000, bringing it down to a more manageable size. In similar

fashion, the yearly charges on the debt were also reduced significantly, from approximately £

13,600,000 to £ 2,700,000. In return, the government agreed to surrender in totally and

irrevocably the same revenues that had constituted the basis of the 1879 settlement, with the

addition of a number of other state revenues. Overall, the arrangement meant that about one

fifth of the state’s revenues would be irretrievably ceded to the administration until the

complete settlement of the outstanding debt (Eldem, 2004,445).

V. Ottoman Public Dept Administration (OPDA)

After the financial crises of 1873 led to the cessation of overseas lending by the

European financial markets, the government was forced to declare in 1875-76 a moratorium

on its outstanding debt which stood at more than 200 million pounds sterling. Bankruptcy of

1875 could only be overcome by central government (House of Osman) giving promises to

bondholders and consolidation of the 210 million pound Ottoman public debt. That is

achieved through establishing a council. After protracted negotiations, the Ottoman Public

Debt Administration (OPDA) was established in 1881 to exercise European control over parts

of Ottoman finances and ensure orderly payments on the outstanding debt whose nominal

value was reduced approximately by half during the negotiations. For the following three

decades until the outbreak of World War I, a sizable share of government revenues were

controlled by the OPDA and applied to debt payments. This control and the regular payments

on the debt were quite reassuring for the European financial markets. The OPDA transferred

huge amount of investments from England to build the credit. In five years the 1/5 of the

huge debt was paid off. In 1880 the sultan had a good credit. That gave chance to other

branches of the Empire to bring new credits. The borrowing was blooming before turn of the

century.

As a result, the Ottoman government was able to resume borrowing towards the end

of the century. With the rise in military spending, both external borrowing and the annual

payments on the outstanding debt gained momentum after the turn of the century. The almost

permanent search for new loans led, in turn, to new dependencies and complications in

Ottoman foreign policy. On the eve of World War I, the volume of annual borrowing as well

as the outstanding external debt had once again reached the unusually high proportions

witnessed in the 1870s.

It may be useful to consider the long term balance sheet for the mid-nineteenth

century regime change from debasements to stable currency and external borrowing. Relative

monetary stability, rapid expansion of foreign trade and European direct investment should

appear on the positive side. Annual rate of growth of Ottoman foreign trade averaged close to

5 percent in real terms during the nineteenth century. There is also some evidence for

economic growth in the period before World War I which can be linked to the growing

commercialization of the Ottoman economy. Monetary stability undoubtedly contributed to

economic growth. At the same time, however, the default of 1875-76, the establishment of

the Ottoman Public Debt Administration and the surrender of some of the leading sources of

revenue to the European creditors in 1881 also suggest that the Ottomans paid a heavy price

for borrowing large amounts from abroad before putting their fiscal house in order (Pamuk,

2002,32).

In 1900, OPDA was financing many railways and many other industrial artifacts. The

organization was very famous at this time. It was announced as the new frontiers of the

Ottoman extension. Some claimed that OPDA was an instrument of imperialism. If this

argument was true, the controllers (board of regions) were not obviously the Ottomans. The

Sultan had the power of assigning only one member to the board.

The Muharrem Decree of 1881 was a turning point in the Ottoman debt crisis and led

to the establishment of a commission for financial reforms representing British, Dutch,

French, German, Italian, Austrian and Ottoman bondholders. This commission in turn led to

the formation of the Public Debt Administration (OPDA) which serviced the obligations

incurred during 1854-1877. As most of the foreign bonds were in British and French hands, it

was decided that the president of the United Council of Foreign Bondholders, an office which

was tenable for five years, should be elected alternately from French and English holders.

The OPDA instituted many important financial reforms and implemented new policies such

as the keeping of accounts, double entry bookkeeping, general budgets and generally prudent

fiscal management. Some of the most liquid revenues of the Empire were transferred to the

OPDA, among them the excise taxes on documents, spirits and tobacco, the government

monopoly in salt and the silk tithe (Eldem,2005,440).

VI. Effects of the OPDA to Ottoman Debt Process

The OPDA was highly successful and paid out 113 million pound sterling in debt

service between 1882 and 1914. Its success laid in the direct reforms it applied. Among

others, the OPDA established the Institute of Sericulture in Bursa to increase silk tithe

revenues. This institute provided free instruction and distributed mulberry trees: between

1888 and 1905, some 15-20 million mulberry trees were planted in and around Bursa. These

measures, coupled with sustained world demand for silk, resulted in a sharp increase in

output and exports. Similarly, the OPDA instituted a campaign to raise the domestic

consumption of salt especially in olive and fish processing industries and sent agents to India

to develop a demand for Ottoman salt mined from the Red Sea. As a direct result of this, the

volume of salt exports increased six fold and salt revenues doubled between 1892 and 1909.

The tobacco industries also came under the direct control of the OPDA. However, in

1883, the Commission turned the tobacco monopoly over to a private German-French

company called the Régie Cointeressée de Tabacs de l’Empire Ottoman, which divided the

profits with the Ottoman treasury. The Régie had the sole right to buy and process all tobacco

grown, but in return secured and registered the crops in the fields so that nothing could be

harvested and sold illegally. The tobacco then was stored in the Régie warehouses and the

sales price was fixed by negotiations with the planters. Any disputes were settled by

arbitration. The Régie was in charge of selling tobacco products throughout the empire,

setting its own retail prices and choosing its shops. Shops selling foreign tobacco products

operated only under license of the Régie (Toprak, 2006: 137)

The OPDA provided the institutional and personal channels through which European

industrial capital flowed into the Empire. It coordinated direct investment, cooperating

closely with the European embassies and the three major banks, namely the French

dominated Imperial Ottoman Bank, the Deutsche Bank, and the British controlled National

Bank. Between 1854 and 1881, some 19 foreign joint-stock companies had been established

in the Empire. By 1908, this had increased to 82, and in 1914 stood at 212. The companies

formed in the latter period were mostly joint enterprises between Europeans and Ottomans.

External lending plays a crucial role as vehicle through which the hegemony of the

core over the periphery is established or restructured. In mid 1870s and 1880s many debtor

countries faced severe external debt service problems and eventually had to agree on new

contracts for the settlement of their debts, a process that always involved power asymmetries

in favor of the creditors. Among these countries Ottoman Empire presents a unique case of an

empire gradually dissolved and peripheralzed within the capitalist world system. The function

of OPDA supports the colonization through lending arguments due to the crucial role it

played in restructuring the Ottoman Economy in accordance with the developing needs of the

core economies represented in the administration. On the other hand, OPDA initiated several

measures that improved the conditions of the sectors under its control by introducing new

technologies, increasing their productivity, and also generated positive externalities for

several other sectors of the economy.

VII. Conclusion

This paper researched the Ottoman Public Debt Administration and effects to the debt

process of Ottoman Empire in Late Era. It focused on the changing structures of the 19

Century in dealing with internal and external borrowing. The influences of moneychangers

and, especially, bankers over the policies of the central government debt policy continued.

Even the reforms of the nineteenth century are best understood as attempts to maintain the

privileged position of the center as well as the territorial integrity of the empire. State

finances were in good shape and there was little need for borrowing until the last quarter of

the sixteenth century. Ottoman institutions of private and public finance retained their Islamic

lineage and remained mostly uninfluenced by the developments in Europe until the end of the

seventeenth century. The Ottoman government continued to rely on tax-farming for both tax

collection and short term borrowing purposes as had been the practice of most Islamic states.

State finances came under increasing pressure in the seventeenth century and again from the

1770s onwards, however. European institutions of both private and public finance began to

grow in influence during the eighteenth century. Ottoman state borrowing in the European

financial markets during the nineteenth century led to a default in the 1870s and partial

control of state finances by European creditors until World War I.