Конверзија српских дугова: Карлсбадски аранжман 1895. године
Conversion of Serbian Debts: Carslbad Arrangement

Summary/Abstract: In the mid 1890s, Serbia started being unable to service foreign debts. In the spring of 1895, in agreement with the King, the government chose an aggressive strategy towards reducing interest rates and extending repayment periods of outstanding loans. The Serbian government negotiated with three partners - banks (Ottoman, Viennise Länderbank and Berliner Handels-Gesellschaft), with the support of governments of Germany and Austro-Hungary. The arrangement was made on June 20th in Carlsbad and resulted in a protocol between the Serbian government and the banks. As per protocol, a new 4% bonds with a maturity of 72 years were issued: (1) they compulsorily replaced outstanding 5% bonds with shorter maturities in the amount of 281.5 million francs, and (2) the amount of 73,7 million francs was left to the Serbian government to cover the budget arrears. The Independent Monopoly Administration was created in order to ensure the proper servicing of debts and was in charge of collecting of all revenues that guaranteed for new bonds. Five Serbian citizens and two banksʼ representatives were on its board of directors. The debt conversion brought relief to the state coffers, but the forced exchange of bonds damaged the reputation of Serbia and hampered later bonds sales. Therefore, the budget crisis was prolonged until a new major loan was granted in 1902.

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