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Ottoman Economy Under Abdülhamid II: Debt, Rail and Banks

How the Ottoman state paid its way, 1876 to 1909: the 1881 debt deal, a creditors' tax office, a tobacco monopoly and railways built on guarantees.

ByAbdullah Habib
31 min read Updated: October 25, 2026
Summarize with:
Colour postcard of Haydarpaşa station seen across the water: a long stone building with a steep slate roof, round corner towers with pointed caps and rows of arched windows, a small passenger boat at the quay, and the printed words «Constantinople. La Nouvelle Gare de Haidar-Pacha»
Postcard of the new Haydarpaşa station, finished in 1908 on the Asian shore, where the Anatolian railway starts. Postcard: Max Fruchtermann, between 1908 and 1917; public domain, file page.

Abdülhamid II (often written Abdul Hamid II) took the Ottoman throne in 1876, when the yearly payments due on its foreign loans were more than half of its normal revenue. What followed: a debt deal in 1881, a tax office run by the lenders, a company that held the whole tobacco trade, railways paid for by promised sums, and the banks.

In short · checked 25.10.2026

The state paid its lenders partly with its own taxes.

  • The debt was cut by agreement. A decree of December 1881, the Muharrem Decree, cut what was owed on the old bonds by up to 54 % and lowered the interest.
  • The lenders ran part of the tax system. A council of seven lenders’ representatives collected revenues such as salt, tobacco, silk, stamps and fishing, and paid the bondholders first.
  • One company held all of tobacco. From 1883 it had the growing, processing and selling. Clashes between its guards and growers were deadly.
  • Railways were paid for by promises. The state promised a company a yearly sum for each kilometre of track and set aside the tithes (the share of the harvest farmers paid the state) of the provinces the line crossed.
  • Two kinds of bank. The Ottoman Bank, with British and French money, acted as the state’s treasurer. Ziraat Bank, named in 1888, supported farmers.
  • The old debt took a century to close. It began in 1854; the last day to claim payment was 25 May 1954.

The Cut · 20.12.1881

Twelve bond issues, before and after the decree

A bond is a paper IOU: the state sold it to lenders and paid them interest. By 1881 the state could not pay what its bonds promised. The Muharrem Decree of 20 December 1881 cut what was owed and the interest on it. Each strip is one bond issue, as long as the amount in circulation on that day; the hatched part is what the decree cut off. The lever switches between before and after the cut. Tap a strip to read its slip.

Source: TDV İslâm Ansiklopedisi (TDV), the encyclopaedia of the Turkish Religious Foundation, on the decree. Amounts in Ottoman lira, the gold lira of the time; checked 25.10.2026.

  1. A1858 loan
  2. A1862 loan
  3. B1860 loan
  4. B1863/64 loan
  5. B1872 loanaccepted amount is higher
  6. C1865 loan
  7. C1869 loan
  8. C1873 loan
  9. C1865/73/74 general debt
  10. DRumeli railway bonds
  11. Ramazan bondsaccepted amount left empty
  12. 1881 privileged bondsnot cut
  13. 1854 loan, turned into the 1877 loanleft outside the decree
  14. 1855 loanleft outside the decree
  15. 1871 loan, turned into the 1877 loanleft outside the decree
  16. 1877 defence loanleft outside the decree

    Bonds under the decree

    In circulation
    219,938,559
    Accepted
    125,250,943

    After the exchange period the total fell to 124,305,049, because 945,894 lira of old bonds were never exchanged.

    With the four loans left outside

    Owed before
    237,138,819
    Owed after
    141,505,309

    The four loans stayed outside the decree and kept their amounts.

    The decree sorted the old bonds into four series, A to D. Up to 54 % came off the debt, and interest rates fell from about 9 % to as low as 1 %.

    Show the bond issues in a table
    IssueSeriesIn circulation on 20.12.1881Accepted by the decreeNote
    1858 loanA4,053,2253,789,848
    1862 loanA5,407,4904,112,411
    1860 loanB1,808,7301,148,621
    1863/64 loanB5,618,2504,371,050
    1872 loanB5,302,2205,745,482The accepted amount is higher than the amount in circulation.
    1865 loanC4,437,9503,212,784
    1869 loanC22,715,00014,174,160
    1873 loanC29,916,41416,528,818
    1865/73/74 general debtC95,917,09648,365,235
    Rumeli railway bondsD34,652,64015,632,548
    Ramazan bonds1,939,558TDV’s table leaves the accepted amount empty, so the strip is drawn cut away.
    1881 privileged bonds8,169,9868,169,986The same amount in both columns: this strip is not cut.
    1854 loan, turned into the 1877 loan1,925,6601,925,660Left outside the decree; the same amount in both columns.
    1855 loan4,196,7204,196,720Left outside the decree; the same amount in both columns.
    1871 loan, turned into the 1877 loan5,783,1405,783,140Left outside the decree; the same amount in both columns.
    1877 defence loan5,294,7405,294,740Left outside the decree; the same amount in both columns.

    Before 1876: how the state came to owe so much

    Two words to know first

    What
    A bond (tahvil) is a printed paper in which the state promises to repay a sum, with yearly interest, to whoever holds it.
    Why
    The state needed cash faster than taxes brought it in: first for the Crimean War, later to cover deficits.
    Who
    Big banks issued the bonds and small savers bought them.
    How much
    Fifteen loans from 1854 to 1874 promised 238,773,272 lira. The state received 127,120,220, because the bonds sold at low prices and commissions were paid.
    When
    The first loan agreement is dated 24 August 1854, the last of the fifteen came in 1874.
    How
    Bankers sold the bonds abroad. The state paid interest every year and named revenues as security, a pledge for repayment: for the first two loans, the tribute of Egypt and the customs of Syria and İzmir.
    What
    A default is a state stopping payment on what it owes. In 1875 the Ottoman state paid half of its yearly instalment in cash and half in new bonds, then stopped altogether.
    Why
    The 1875 budget ran more than 5 million lira short, and 14 million lira of loan instalments fell due the same year.
    Who
    The state stopped; bondholders in Europe took the loss. They protested in the streets, and European opinion turned against the state.
    How much
    Half of the 14 million lira due was paid in five-year bonds at 5 % interest instead of cash.
    When
    A decree of 6 October 1875 announced it, and payments stopped in April 1876, during the war with Serbia.
    How
    The new bonds paid 5 % for five years and were secured on all customs revenues, on salt, tobacco and the sheep tax, and on the tribute of Egypt.

    Most of the borrowed money did not build railways. Of the foreign loans of those years, 7.8 % went into the Rumeli railway. The rest went mostly to cover budget deficits, pay instalments on earlier loans and withdraw worn paper and copper money.

    Foreign loans, 1854 to 1874

    Fifteen loans: 238,773,272 lira promised, 127,120,220 received.

    Each loan was a set of bonds sold in Europe, and each time the state named revenues as security.

    Only the bonds of 1855 sold above their face value (the sum printed on the bond), at 102.6 %.

    Black-and-white photograph of Abdülhamid II in profile: an older man with a beard, in a fez and a dark coat with epaulettes, stepping out of a carriage door and holding a sword, with an ornate lidded stand in the foreground
    Abdülhamid II in the doorway of a carriage. Photo: George Grantham Bain Collection, Library of Congress, catalogued as 1908; public domain, file page.

    The sultan the state got in 1876

    • 31 August 1876. He took the throne after Abdülaziz and Murad V had been removed.
    • A state in trouble. Uprisings in Bosnia-Herzegovina and Bulgaria could not be put down for lack of money, and wars in Serbia and Montenegro had been added.
    • First priority. He put clearing the inherited foreign debts first.
    Earlier reign

    Sultan Abdülmecid I

    The Crimean War, and the first foreign loan of 1854.

    Guide on this site

    Earlier reign

    Sultan Abdülaziz

    His reign, and the fleet he paid for beyond what the budget could carry.

    Guide on this site

    Earlier reign

    Sultan Murad V

    The short reign of 1876, after the October 1875 decree that paid half of what was due in bonds.

    Guide on this site

    The Muharrem Decree: what the lenders accepted

    Two words to know first

    What
    A written order of the government, issued on 20 December 1881 after talks with the lenders. The government called it a nizamnâme (regulation); financial circles knew it as the Muharrem Decree, after the month of its date.
    Why
    The lenders wanted their payment guaranteed. The government wanted a cut in the debt and no foreign intervention: it won a cut of up to 54 % and kept European states from intervening.
    Who
    The government and a group of financiers who acted for the lenders and represented no state. Server Pasha, head of the Council of State, led the government side.
    How much
    Up to 54 % off the debt, and interest rates cut from about 9 % to as low as 1 %.
    When
    Talks began on 13 September 1881. The decree is dated 28 Muharrem 1299, which is 20 December 1881.
    How
    The agreed terms were announced as one government order, which set an accepted amount for each bond issue.
    What
    A conversion is the exchange of old bonds for new ones on lower terms: a smaller amount owed, a lower interest rate, or both.
    Why
    The state could not pay the old terms. In exchange for the cut, the lenders got their payment guaranteed.
    Who
    Each holder of an old bond got a new bond. The loans of 1854, 1855, 1871 and 1877, secured on the tribute of Egypt, stayed outside the decree and kept their amounts.
    How much
    Bonds counted at 219,938,559 lira in circulation became 125,250,943 lira under the decree. With the four loans left outside, 237,138,819 became 141,505,309.
    When
    Old bonds could be exchanged during a set period after 20 December 1881. 945,894 lira of them were never exchanged.
    How
    The debts were merged into four series, A to D, and holders swapped their old bonds for new ones.

    Abdülhamid told the lenders that the debts were private, not debts between states, and asked them to send representatives. They wanted an international commission to run the state’s finances. The government refused.

    1. 13.07.1878The Treaty of Berlin passes part of the debts to states that left the empire or gained land, and the powers recommend an international commission to see the debts paid.
    2. 01.10.1878The government sets up a financial commission of its own under Grand Vizier Hayreddin Pasha, to head off a foreign one. The managers of the Ottoman Bank and of Crédit Lyonnais sit on it.
    3. 22.11.1879The debts owed inside the empire, up to 9 million lira, are cut to 8,725,000 lira and set to be paid in ten equal instalments. The lenders’ first office starts running assigned revenues.
    4. 23.10.1880A payment plan goes to the lenders and the powers: more revenues to be assigned, to be run by a bank the lenders choose.
    5. 13.09.1881Talks begin under Server Pasha. The lenders ask for an international commission, the government refuses, and a council of the lenders’ representatives is agreed instead.
    6. 20.12.1881The decree is issued.

    The Public Debt Administration: a tax office run by the lenders

    Two words to know first

    What
    A body run by the lenders that collected certain state revenues and paid the bondholders first. Its name, Düyûn-ı Umûmiyye, means «the general debts».
    Why
    To see the debts paid in order. The decree guaranteed the lenders’ payment and kept European states from intervening.
    Who
    A council of seven lenders’ representatives, a general director chosen by the council, and 5,537 staff at the start of the First World War, 182 of them foreign nationals.
    How much
    Each year the revenues paid 5 % of the foreign debts: 1 % of the principal and 4 % interest. On the debt that remained, that was 5,850,000 lira. Anything above it went to the treasury. From 1882 to 1914 the revenues never reached that sum.
    When
    From the decree of 20 December 1881, in Sirkeci at first and from 1897 in a large building of its own in Cağaloğlu.
    How
    It collected the revenues handed over to it, paid the yearly sum and sent any surplus to the treasury. The council drew up a budget two months before each fiscal year (the state’s budget year) and gave it to the Ministry of Finance.
    1British2French3German4Austrian5Italian6Dutch7OttomanGold ring: British and French members took turns as chair.

    The seven seats of the council. The numbers run left to right: 1 British, 2 French, 3 German, 4 Austrian, 5 Italian, 6 Dutch and 7 Ottoman creditors.

    What
    The Düyûn-ı Umûmiyye Meclisi, the council of the Public Debt Administration: seven members, one for each group of creditors.
    Why
    To protect the lenders’ interest and see the debts paid to a plan.
    Who
    One member each for the British, French, German, Austrian, Italian, Dutch and Ottoman creditors. The government sent a commissioner, paid by the council, with an advisory vote at meetings, and many inspectors, paid by the government.
    How much
    Pay was £2,000 for members from abroad and £1,200 for those living in Istanbul.
    When
    Members were elected for five years and counted as civil servants in Ottoman service. The chair passed between the French and British members every five years.
    How
    Disputes between the council and the government went to an arbitration board of four, chosen by the two sides.
    The 1879 contract

    The lenders’ first office

    The Rüsûm-ı Sitte Administration, the name of a bundle of state revenues, ran among others stamps, sea-product duties in and around Istanbul, the silk tithe of Istanbul, Edirne, Samsun and Bursa, and tobacco. It had 5,714 staff.

    Source: TDV İslâm Ansiklopedisi · checked 25.10.2026

    Handed over in 1881

    Revenues the lenders collected

    The revenues the first office had run, plus Bulgaria’s tribute, the surplus of Cyprus, the tax of Eastern Rumelia and the customs revenues. The Administration could also run the tobacco and salt monopolies, trades in which only one seller is allowed.

    Source: TDV İslâm Ansiklopedisi · checked 25.10.2026

    Tobacco tithe and monopolySaltStampsSilk titheFishing00.5 M1 M1.5 M2 M2.5 M3 M1883–841883–84 Tobacco tithe and monopoly: 870,694 lira1883–84 Salt: 658,554 lira1883–84 Stamps: 147,687 lira1883–84 Silk tithe: 21,972 lira1883–84 Fishing: 36,570 lira1886–871886–87 Tobacco tithe and monopoly: 842,114 lira1886–87 Salt: 682,227 lira1886–87 Stamps: 162,672 lira1886–87 Silk tithe: 31,909 lira1886–87 Fishing: 37,104 lira1887–881887–88 Tobacco tithe and monopoly: 842,070 lira1887–88 Salt: 655,113 lira1887–88 Stamps: 156,274 lira1887–88 Silk tithe: 34,717 lira1887–88 Fishing: 40,625 lira1889–901889–90 Tobacco tithe and monopoly: 833,455 lira1889–90 Salt: 722,059 lira1889–90 Stamps: 186,053 lira1889–90 Silk tithe: 39,281 lira1889–90 Fishing: 42,725 lira1890–911890–91 Tobacco tithe and monopoly: 818,382 lira1890–91 Salt: 699,887 lira1890–91 Stamps: 205,979 lira1890–91 Silk tithe: 51,251 lira1890–91 Fishing: 47,307 lira1891–921891–92 Tobacco tithe and monopoly: 877,652 lira1891–92 Salt: 730,354 lira1891–92 Stamps: 209,373 lira1891–92 Silk tithe: 45,895 lira1891–92 Fishing: 48,445 lira1892–931892–93 Tobacco tithe and monopoly: 888,559 lira1892–93 Salt: 787,645 lira1892–93 Stamps: 212,868 lira1892–93 Silk tithe: 56,409 lira1892–93 Fishing: 44,405 lira1893–941893–94 Tobacco tithe and monopoly: 892,067 lira1893–94 Salt: 814,235 lira1893–94 Stamps: 224,208 lira1893–94 Silk tithe: 66,739 lira1893–94 Fishing: 40,037 lira1895–961895–96 Tobacco tithe and monopoly: 894,292 lira1895–96 Salt: 773,865 lira1895–96 Stamps: 224,908 lira1895–96 Silk tithe: 46,773 lira1895–96 Fishing: 46,356 lira1896–971896–97 Tobacco tithe and monopoly: 861,793 lira1896–97 Salt: 828,506 lira1896–97 Stamps: 220,145 lira1896–97 Silk tithe: 59,163 lira1896–97 Fishing: 47,832 lira1898–991898–99 Tobacco tithe and monopoly: 814,003 lira1898–99 Salt: 870,759 lira1898–99 Stamps: 233,406 lira1898–99 Silk tithe: 65,505 lira1898–99 Fishing: 52,309 lira1899–19001899–1900 Tobacco tithe and monopoly: 792,857 lira1899–1900 Salt: 823,826 lira1899–1900 Stamps: 235,168 lira1899–1900 Silk tithe: 90,719 lira1899–1900 Fishing: 47,543 lira1900–19011900–1901 Tobacco tithe and monopoly: 834,681 lira1900–1901 Salt: 949,169 lira1900–1901 Stamps: 225,926 lira1900–1901 Silk tithe: 69,846 lira1900–1901 Fishing: 50,504 lira1902–19031902–1903 Tobacco tithe and monopoly: 970,185 lira1902–1903 Salt: 935,763 lira1902–1903 Stamps: 220,234 lira1902–1903 Silk tithe: 76,094 lira1902–1903 Fishing: 45,734 lira1903–19041903–1904 Tobacco tithe and monopoly: 1,015,962 lira1903–1904 Salt: 937,962 lira1903–1904 Stamps: 233,043 lira1903–1904 Silk tithe: 106,117 lira1903–1904 Fishing: 54,960 lira1905–19061905–1906 Tobacco tithe and monopoly: 955,790 lira1905–1906 Salt: 1,037,586 lira1905–1906 Stamps: 439,264 lira1905–1906 Silk tithe: 117,495 lira1905–1906 Fishing: 63,924 lira1906–19071906–1907 Tobacco tithe and monopoly: 1,022,553 lira1906–1907 Salt: 1,075,880 lira1906–1907 Stamps: 353,631 lira1906–1907 Silk tithe: 110,132 lira1906–1907 Fishing: 54,952 lira1907–19081907–1908 Tobacco tithe and monopoly: 1,059,422 lira1907–1908 Salt: 1,123,886 lira1907–1908 Stamps: 366,254 lira1907–1908 Silk tithe: 131,217 lira1907–1908 Fishing: 69,548 lira1908–19091908–1909 Tobacco tithe and monopoly: 1,040,517 lira1908–1909 Salt: 1,063,566 lira1908–1909 Stamps: 377,681 lira1908–1909 Silk tithe: 110,995 lira1908–1909 Fishing: 71,287 lira1911–121911–12 Tobacco tithe and monopoly: 824,752 lira1911–12 Salt: 1,271,703 lira1911–12 Stamps: 506,164 lira1911–12 Silk tithe: 90,661 lira1911–12 Fishing: 67,653 lira1913–141913–14 Tobacco tithe and monopoly: 884,600 lira1913–14 Salt: 1,103,023 lira1913–14 Stamps: 419,241 lira1913–14 Silk tithe: 82,497 lira1913–14 Fishing: 77,426 lira
    Yearly yield of five of the revenues the administration collected, in Ottoman lira, for 21 fiscal years between 1883–84 and 1913–14. The five: tobacco tithe and monopoly, salt, stamps, silk tithe and fishing. A fiscal year is the state’s budget year. Source: TDV İslâm Ansiklopedisi, table of yearly revenues in «Düyûn-ı Umûmiyye», checked 25.10.2026.
    Show the numbers of the chart
    Fiscal yearTobacco tithe and monopolySaltStampsSilk titheFishing
    1883–84870,694658,554147,68721,97236,570
    1886–87842,114682,227162,67231,90937,104
    1887–88842,070655,113156,27434,71740,625
    1889–90833,455722,059186,05339,28142,725
    1890–91818,382699,887205,97951,25147,307
    1891–92877,652730,354209,37345,89548,445
    1892–93888,559787,645212,86856,40944,405
    1893–94892,067814,235224,20866,73940,037
    1895–96894,292773,865224,90846,77346,356
    1896–97861,793828,506220,14559,16347,832
    1898–99814,003870,759233,40665,50552,309
    1899–1900792,857823,826235,16890,71947,543
    1900–1901834,681949,169225,92669,84650,504
    1902–1903970,185935,763220,23476,09445,734
    1903–19041,015,962937,962233,043106,11754,960
    1905–1906955,7901,037,586439,264117,49563,924
    1906–19071,022,5531,075,880353,631110,13254,952
    1907–19081,059,4221,123,886366,254131,21769,548
    1908–19091,040,5171,063,566377,681110,99571,287
    1911–12824,7521,271,703506,16490,66167,653
    1913–14884,6001,103,023419,24182,49777,426
    Sepia photograph of the Public Debt Administration building in Cağaloğlu: a long stone building with arched windows, a central tower with a pointed cap and corner towers, seen over brick and tile rooftops
    The Public Debt Administration building in Cağaloğlu, seen over the rooftops. Photo: SALT Research Photograph Archive, undated; no known copyright restrictions, via Flickr Commons, file page.

    The building

    • First home. In Sirkeci, in a building the Galata bankers arranged for the lenders’ first office.
    • 1897. It moved into a large building of its own in Cağaloğlu, completed that year. The architect was Alexandre Vallaury, who also designed the Ottoman Bank on Voyvoda Street.
    • Today the building is İstanbul Erkek Lisesi, the Istanbul Boys’ High School.
    • Staff. In Istanbul there were 508 staff members and 42 inspectors at the start of the First World War.
    The same building today as İstanbul Erkek Lisesi: a long pale stone building with a red-tiled roof and tall arched windows in the middle, a grey dome and a minaret under scaffolding behind it, and houses in front
    The same building today, İstanbul Erkek Lisesi. Photo: Eusebius, 26.04.2011, Wikimedia Commons; CC BY 3.0, file page.

    The borrowing went on after 1881. The state signed 18 more loan agreements: 12 from 1886 to 1908 and 6 from 1908 to 1914. Most of the money went into railways, ports and irrigation canals, and payments ran regularly until the First World War.

    A verdict on the Administration

    • The cost. TDV’s verdict: the debts hurt the empire’s development and weighed on the new Republic, and the Administration became «practically a state within a state».
    • The use. It was also useful in running state resources efficiently and in paying the debts in order.
    • The change. Before it, most borrowed money went to deficits and old instalments; afterwards mostly into railways, ports and canals.

    Tithe and tobacco: the Régie

    Two words to know first

    What
    The tithe (öşür, from the Arabic word for «one tenth») is a share of a farmer’s harvest paid to the state.
    Why
    Taxes on farming were the base of the state’s income, and the tithe was among them.
    Who
    Farmers paid it. Since the 17th century the right to collect it was auctioned to tax farmers (iltizam). The Public Debt Administration collected the tithes of some provinces for the lenders.
    How much
    In 1904–05 the rate was an eighth of the crop. For tobacco, after the Tanzimat, the reform period of the mid-19th century, it was 10 % of the market price. The tithe was 33.7 % of budget revenue in 1876–77 and 19.9 % in 1906–07.
    When
    Paid at harvest, every year, until it was abolished in 1925.
    How
    In kind, as a share of the crop, or in cash. Each crop had its own tithe: tobacco, wheat, silk.
    What
    A monopoly is a trade in which only one seller is allowed. The Régie (from the French régie, «administration») was the company that held the tobacco monopoly: Osmanlı Devleti Tütünleri Müşterekülmenfaa Reji Şirketi.
    Why
    The decree let the Administration run the tobacco monopoly. It handed the tobacco tithe to the company in return for a yearly advance.
    Who
    A company founded on 27 May 1883, with 1,112 guards (kolcu) and staff across the country.
    How much
    750,000 lira a year, paid to the Administration in advance, in quarterly instalments, even if the company made a loss.
    When
    A 30-year concession (a permit to run the trade) from 1883, extended in 1913 to 1928. The company went on until the Lausanne Treaty of 1923.
    How
    All tobacco growing, processing and selling went to it. Its guards policed the trade, and it tried to buy from growers at the lowest price.

    The company tried to buy tobacco at the lowest price. Growers wanted to sell by illicit routes to foreign buyers who paid three or four times as much. TDV puts the deaths in clashes between the company’s guards and tobacco growers from 1883 to 1902 at more than 20,000.

    What the sultan could do

    • He asked. Abdülhamid asked for the company’s pressure on the people to end.
    • The government could not end it. It tried several ways to cancel the concession and did not succeed.
    • TDV’s judgement. The company went on exploiting Turkish tobacco growers until the Lausanne Treaty of 1923.

    Railways: paid for by promises

    Three words to know first

    What
    A concession (imtiyaz) is a permit: the state lets a company build and run something, here a railway, for a set time on the terms of a contract.
    Why
    Farm output fell, tithe collection faltered and investment stopped. The concession system brought new investment, but it also brought large bribes and corruption, in TDV’s view.
    Who
    Exploitation rights went to British, French and German companies and banks. İzmir–Aydın was British. The Anatolian concession of 1888 went to Alfred von Kaulla, manager of the Württembergische Vereinsbank, a German bank.
    How much
    The price was a promise, not cash: a yearly sum for each kilometre built (see the next tab) and, for the Baghdad line, free use of the state’s forests, mines and quarries along it.
    When
    Anatolian railway: contract of 4 October 1888, company of 4 March 1889. Baghdad railway: agreements from 23 December 1899 to 21 March 1903, company of 13 April 1903.
    How
    The company built and ran the line. For the Baghdad line the government issued Ottoman bonds of 275,000 francs for every kilometre built, and the company’s real estate stood as security.
    What
    A kilometre guarantee is a yearly payment the state promised a railway company for each kilometre of track.
    Why
    The state could not pay to extend the Haydarpaşa–İzmit line, which stood still from 1873 until 1888, and foreign capital was needed. About two thirds of the foreign capital invested in the empire went to railway companies.
    Who
    The state promised and the railway company received. The farmers along the line paid the tithes that stood as the guarantee.
    How much
    15,000 francs a year for each kilometre, in the Anatolian contract of 4 October 1888, on a line extended from Haydarpaşa–İzmit (92 km) towards Ankara.
    When
    Paid every year. For the Baghdad line, the pledged tithes were those of Konya, Aleppo and Urfa.
    How
    The guarantee was the tithe income of the provinces the line crossed. The Public Debt Administration collected these tithes in the lenders’ name.
    What
    A buy-back is the state’s right, written into the concession, to buy the company out.
    Why
    So that a line the company built and ran could return to the state.
    Who
    The state buys and the company sells. The Baghdad company had mostly German capital, with 30 % French.
    How much
    The Rumeli railway company was bought out and nationalised under a contract of 25 December 1936 for 6 million lira.
    When
    The Baghdad contract ran 99 years and gave the state the right to buy after the first 30. The Republic bought the company on 10 January 1928.
    How
    By agreement with the company: the state paid and took over the line and its running, as in 1928 and in 1936.

    The state paid for railways with promises, not cash. A foreign company built and ran the line; the state promised a yearly sum for each kilometre and set aside the tithes of the provinces along the way.

    1. 1856 to 1866İzmir–Aydın: a British company takes the concession in 1856 and opens the line in 1866.
    2. 03.05.1873The 92 km Haydarpaşa–İzmit line opens.
    3. 12.08.1888The first Orient Express leaves Sirkeci for Vienna. The Rumeli company had passed to Austrian nationality in 1878; German capital took it over in 1889.
    4. 04.10.1888The Anatolian contract: the line is to go on to Ankara, with 15,000 francs a year for each kilometre. The company is founded on 04.03.1889.
    5. 1890 to 1896İzmit–Adapazarı (1890), Haydarpaşa–Eskişehir–Ankara (1892) and Eskişehir–Konya (1896) are finished: more than 1,000 kilometres of line in all.
    6. 1899 to 1903The Baghdad agreements. The company is founded on 13.04.1903, and its first line is the 250 km from Konya to Ereğli.
    7. 1906 to 1908Haydarpaşa station is built on land made firm with piles, to the plans of Otto Ritter and Helmuth Cuno.
    8. 1909After Bulgaria declares independence, the empire gives up the 309 km of Eastern Rumelia lines for compensation of 42 million francs.
    9. 1918 and 1928The line reaches Baghdad without a break in October 1918. The Republic buys the company and nationalises it on 10.01.1928.
    Certificate of one bond of the 4 % Imperial Ottoman Loan of the Baghdad Railway, first series: a tall sheet with a red-brown ornamental border, the sultan's cipher at the top, text in Ottoman Turkish, French, German and English, and three signatures at the foot
    Certificate of one bond of the 4 % Imperial Ottoman Loan of the Baghdad Railway, first series, issued through the Imperial Ottoman Bank in 1903. The value is printed in five currencies: Fr. 500, Rm. 408, £20, Dutch fl. 240 and L.T. 22. Public domain, file page.

    A railway bond

    • What. One bond of the loan that paid for the Baghdad line.
    • In five currencies. The value is printed in francs, marks, pounds sterling, Dutch florins and Ottoman liras, and the text runs in French, German and English.
    • How the loan grew. For every kilometre built, the government issued bonds with a face value of 275,000 francs in all; each certificate is one bond.
    The side of Sirkeci station in Istanbul: a pale stone building with a pink upper wall, a lower wall of red and cream banded brick, arched windows with a round window in the middle, a small steam locomotive behind a fence at the right and a sign reading İSTANBUL GAR
    The side of Sirkeci station in Istanbul. Photo: Mathemonkey, 29.05.2022, Wikimedia Commons; CC0, file page.

    Two stations, two shores

    • Sirkeci is on the European side. The first Orient Express to Vienna left from it on 12 August 1888.
    • Haydarpaşa is on the Asian side, where the Anatolian line starts. The first small station there opened with the suburban line of 1872; the present building dates from 1908.

    What the concessions brought

    • Grain and settlers. Anatolian grain reached Istanbul, so the capital no longer depended on Russian and Bulgarian wheat, and hundreds of thousands of migrants settled along the line.
    • Zones of influence. Companies of one state gathered their concessions in set regions, which split the empire into zones of foreign economic influence.
    • Rivalry. The struggle between foreign companies in railways ended with a German win.
    Another railway

    Hejaz Railway: Route and Stations from Damascus to Medina

    A line the state built itself from 1900, paid for from a railway fund that took in donations. Its own guide has the route and the stations.

    Guide on this site · fund: TDV İslâm Ansiklopedisi, checked 25.10.2026

    Banks: one foreign, one for farmers

    The state first borrowed abroad in 1854, during the Crimean War, and needed a bank to handle the payments to its lenders. The first Ottoman Bank was set up in 1856 for that work. In 1863 it became a British–French bank with the right to print banknotes.

    1856

    A bank for the debt

    The first Ottoman Bank (Bank-ı Osmanî) was founded with British capital, with its centre in London, when the government, borrowing abroad for the first time, needed a state bank to handle debt payments. Its powers were small: small loans and advances to the government.

    Source: Central Bank of the Republic of Türkiye (TCMB), virtual museum · checked 25.10.2026

    1863

    Bank-ı Osmanî-i Şahane

    It became a British–French partnership with a monopoly on printing banknotes for 30 years, and acted as the state’s treasurer: it collected revenue, paid the Treasury’s bills and paid interest and principal on the debts.

    Source: TCMB virtual museum · checked 25.10.2026

    Later

    A bank under foreign capital

    Foreign ownership drew reaction in time and led to the idea of a national central bank; a national credit bank was founded on 11 March 1917. Under Abdülhamid the bank was given wide powers, which let foreign experts supervise state finance, and it did the central bank’s work in Türkiye until 1930.

    Sources: TCMB virtual museum · TDV İslâm Ansiklopedisi · checked 25.10.2026

    Black-and-white print of the Ottoman Bank head office in Karaköy: a tall building of several floors with a central tower, three round windows under a cornice, balconies with sloping roofs, set among small houses and trees
    Print of the Ottoman Bank head office in Karaköy, built 1890–92 to a design by Alexandre Vallaury and inaugurated on 27.05.1892. Print: L’Illustration, 05.09.1896; public domain, file page.
    A cancelled 200-kuruş banknote of the Ottoman Bank: green, pink and blue ornamental print with the sultan's cipher at the top, Ottoman Turkish and French text, «Ps 200» in a round panel at the left, the number in Arabic figures at the right, the words «Remboursable à Smyrne» at the foot and a blue ANNULÉ stamp across the middle
    The İzmir issue of the bank’s 200-kuruş (piastre) note: İzmir is named as the place of payment («Remboursable à Smyrne»), and the note is stamped ANNULÉ, cancelled. The first 200-kuruş notes were ready on 03.06.1863 and in circulation in November 1863; they could be exchanged for gold. Photo: SALT Research, 06.03.2014; no known copyright restrictions, via Flickr Commons, file page.
    Ziraat Bank

    From the Menâfi Sandıkları to Ziraat Bankası

    Credit funds for farmers set up under Abdülaziz took the name Menâfi Sandıkları («benefit funds») in 1883 and became Ziraat Bankası on 15 August 1888. Under Abdülhamid its organisation was widened and branches opened in various places to support farmers. A share added to the tithe, the menâfi share, financed the founding of the bank.

    Guide on this site: Ziraat Bank · Sources: TDV İslâm Ansiklopedisi · checked 25.10.2026

    Factories, water and chambers

    Cloth

    Feshane

    Feshane made fezzes and wool cloth. From 1877 its whole output went to military needs. It won a prize at the Chicago fair in 1893, was enlarged and renewed in 1894 and opened a school in 1895. Enlarged again in 1916, it and Hereke together supplied half of the state’s total weaving output.

    Source: TDV İslâm Ansiklopedisi · checked 25.10.2026

    Industry

    Hereke and Yıldız

    The Hereke cloth factory was expanded and the Yıldız porcelain factory opened in the same reign.

    Source: TDV İslâm Ansiklopedisi · checked 25.10.2026

    Order

    Chambers and a census

    Chambers of trade, agriculture and industry opened across the country. A population-registration office was set up for the first time, to record the people and property of the country every year.

    Source: TDV İslâm Ansiklopedisi · checked 25.10.2026

    Cities

    Trams, quays and telegraph

    Horse-drawn and electric trams ran in several cities, quays were built, and telegraph lines were drawn as far as the Hejaz and Basra. A paved road network was built in Anatolia, where there were no roads.

    Source: TDV İslâm Ansiklopedisi · checked 25.10.2026

    Water

    The Hamidiye water

    The Hamidiye water gathered 56 springs in 20 chambers and carried 1,200 to 1,300 cubic metres a day to Istanbul, soft water of clean spring origin. Most of the works were finished in 1900, and the water was first supplied to the city on 26 May 1902.

    Source: TDV İslâm Ansiklopedisi · checked 25.10.2026

    How the debt ended: a hundred years after the first loan

    1. 1914 to 1918The Allied states ban the payment of coupons, the yearly interest slips of the bonds, to their citizens, so payments stop. The council keeps collecting revenues without its British and French members present.
    2. 1920The ban is lifted and the Administration pays saved coupons as far as it can. Then the Ankara government takes the assigned revenues and payments stop again.
    3. 23.07.1923The Lausanne Treaty shares the debts: those taken before 7 October 1912 among the states that left the empire after the Balkan War, later ones among the new states of Asia.
    4. 13.06.1928Türkiye agrees to pay 62 % of the part before 1912 and 76 % of the later part: 107,528,461 of 161,303,833 lira, from 42 loan agreements of 1854 to 1914, over 99 years.
    5. 22.04.1933Interest rises from 4 % to 7.5 % in return for a cut of 28,163,540 lira in the principal. The debt stands at 78,349,417 lira, to be paid over fifty years.
    6. 1936 and 1938Payments in half francs and half lira, then in lira only.
    7. 30.09.1940Türkiye stops recognising the council in Paris and takes the payments on itself.
    8. 25.04.1944 to 25.05.1954The government buys back the bonds the creditors hold, over ten years. The last day to apply for payment is 25 May 1954.

    Türkiye paid 29 years before the date set in 1933. That raised its financial standing. The borrowing that began in 1854 closed after exactly 100 years.

    Questions people ask

    Did the sultan wipe out the debt?

    No. The 1881 decree cut it, and with the four loans left outside it stood at 141,505,309 lira. During his reign 30 % of state revenue went to debts and interest, and the old debts were still not cleared. TDV adds that far more was paid than was borrowed and that the burden was largely lightened. The old debt was settled only in the Republic, with 25 May 1954 as the last day to claim payment.

    What was the Public Debt Administration?

    A body run by the lenders under the decree of 20 December 1881. It collected certain state revenues, such as salt, tobacco, silk, stamps and fishing, and paid the bondholders first. A council of seven lenders’ representatives ran it. TDV calls it «practically a state within a state» and also says it was useful in running state resources efficiently and in paying debts in order.

    Who owned the railways?

    It varied. İzmir–Aydın was British. The Rumeli company passed to Austrian nationality in 1878, and German capital took it over in 1889. The Baghdad company had mostly German capital with 30 % French. The Hejaz line was built by the state.

    What is a monopoly?

    A trade in which only one seller is allowed. The decree let the Public Debt Administration run the tobacco and salt monopolies. In 1883 it passed tobacco to the Régie, a company that then held all tobacco growing, processing and selling.

    Is the Ottoman Bank the same as Ziraat Bank?

    No. The Ottoman Bank (1863) was a British–French bank that printed banknotes and acted as the state’s treasurer. Ziraat Bank took its name on 15 August 1888 and grew out of credit funds for farmers.

    Sources, checked 25.10.2026

    Show the sources
    1. Düyûn-ı Umûmiyye (Cevdet Küçük, Tevfik Ertüzün) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    2. Abdülhamid II (Cevdet Küçük) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    3. Abdülaziz (Cevdet Küçük) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    4. Bağdat Demiryolu (Kemal Beydilli) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    5. Rumeli Demiryolu (Vahdettin Engin) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    6. Haydarpaşa (Semavi Eyice) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    7. Hicaz Demiryolu (Ufuk Gülsoy, William Ochsenwald) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    8. Öşür, section on the Ottomans (Ahmet Tabakoğlu) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    9. Tütün (Fehmi Yılmaz) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    10. Feshâne (Tevfik Güran) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    11. Hamidiye Suyu (Kazım Çeçen) — TDV İslâm Ansiklopedisi, checked 25.10.2026
    12. TCMB history: the Ottoman Bank — Central Bank of the Republic of Türkiye, virtual museum, checked 25.10.2026
    13. Okul Binamız (the school’s page on its building) — İstanbul Erkek Lisesi, school site of the Turkish Ministry of National Education, checked 25.10.2026

    Article Information

    Written by: Abdullah Habib
    Published: May 29, 2022
    Category: Economy

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