Abstract

Countries have attracted foreign sources with a limited time by external debt transactions. Basically foreign debts are used to finance budget deficit and current account deficits. Providing temporary relief for the country's economy, foreign debts may case troubles when the time comes for payment of interest and principal payments unless they are invested in productive areas. Ottoman had lived this experience by losing her fiscal independence.

The Ottoman Empire took its first foreign debt in 1854 from the United Kingdom because of the Crimean War and the amount of foreign debts continuously increased in subsequent years.

In this study, it is subjected that the foreign debts taken in the period of 1854-1874 was the first twenty years of the foreign debt adventure of the Ottoman Empire and the cost of the debts taken to the state. Then, the foreign debts are recalculated for the amount of money today which dragged the Ottoman Empire into bankruptcy. Thus, though it covers a very short period, how the excessive foreign borrowing led a state to fall into insolvency is tried to explain.