Isma'il Pasha, known as Ismail the Magnificent (Arabic: إسماعيل باشا) (December 31, 1830–March 2, 1895), was Wali and subsequently Khedive of Egypt from 1863 until he was removed at the behest of the British in 1879. While in power he greatly modernized Egypt, but also put the country heavily in debt. His philosophy can be glanced at through the statement he made in 1879: "My country is no longer in Africa; we are now part of Europe. It is therefore natural for us to abandon our former ways and to adopt a new system adapted to our social conditions."

Youth and education
After the death of Said, Ismail was proclaimed Governor on January 19, 1863. In 1867 he obtained from his suzerain, the Ottoman Sultan Abdülâziz, firmans recognizing him as Khedive in exchange for an increase in the tribute. These firmans also changed the law of succession to direct descent from father to son rather than brother to brother, and in 1873 he obtained a new firman confirming Egypt's virtual independence from the Porte.

Khedive of Egypt
Ismail launched vast schemes of internal reform on the scale of his grandfather, remodeling the customs system and the post office, stimulating commercial progress, creating a sugar industry, building palaces, entertaining lavishly and maintaining an opera and a theatre. He greatly expanded Cairo, building an entire new city on its western edge modeled on Paris. Alexandria was also improved. He launched a vast railroad building project that saw Egypt rise from having virtually none to the most railways per habitable kilometer of any nation in the world.
One of his most significant achievements was to establish an assembly of delegates in November 1866. Though this was supposed to be a purely advisory body, its members eventually came to have an important influence on governmental affairs. Village headmen dominated the assembly and came to exert increasing political and economic influence over the countryside and the central government. This was shown in 1876, when the assembly persuaded Ismail to reinstate the law (enacted by him in 1871 to raise money and later repealed) that allowed landownership and tax privileges to persons paying six years' land tax in advance.
Ismail tried to reduce slave trading and extended Egypt's rule into Africa. In 1874 he annexed Darfur, but was prevented from expanding into Ethiopia after a military defeat at Gura' in March, 1876.

Reforms
Ismail dreamt of expanding his realm over the whole Nile including its diverse sources and over the whole African coast of the Red Sea. This, together with rumours about rich raw material and fertile soil, led Ismail to expansive policies directed against Ethiopia under the Christian Emperor Yohannes IV. In 1865 the Ottoman Sublime Porte ceded the Ottoman Province of Habesh (with Massawa and Sawakin at the Red Sea as the main cities of that province) to Ismail. This province, neighbor of Ethiopia, first consisted of a coastal strip only, but expanded subsequently inland into territory controlled by the Ethiopian ruler. Here Ismail occupied regions originally claimed by the Ottomans when they had established the province (eyaleti) of Habesh in the 16th century. New economically-promising projects, like huge cotton plantations in the Barka, were started. In 1872 Bogos (with the city of Keren) was annexed by the governor of the new "Province of Eastern Sudan and the Red Sea Coast", Werner Munzinger Pasha. In October 1875 Ismail's army occupied the adjacent highlands of Hamasien, which were then tributary to the Ethiopian Emperor. In November this army was virtually annihilated during the battle of Gundet near the Mereb river. In March 1876 Ismail's army again suffered a dramatic defeat after an attack by Yohannes's army at Gura'. Ismail's son Hassan was captured by the Ethiopians and only released after a large ransom. This was followed by a long cold war, only finishing in 1884 with the Anglo-Egyptian-Ethiopian Hewett Treaty, when Bogos was given back to Ethiopia. The Red Sea Province created by Ismail and his governor Munzinger Pasha was taken over by the Italians shortly thereafter and became the territorial basis for the Colonia Eritrea (proclaimed in 1890).

War with Ethiopia
Ismail's khedivate is closely connected to the building of the Suez Canal. He agreed to, and oversaw, the Egyptian portion of its construction. On his accession, he refused to ratify the concessions to the Canal company made by Said, and the question was referred in 1864 to the arbitration of Napoleon III, who awarded £ 3,800,000 to the company as compensation for the losses they would incur by the changes which Ismail insisted upon in the original grant. Ismail then used every available means, by his own undoubted powers of fascination and by judicious expenditure, to bring his personality before the foreign sovereigns and public, and he had much success. In 1867 he visited Paris and London, where he was received by Queen Victoria and welcomed by the Lord Mayor. Whilst in England he also saw a Royal Navy Fleet Review with the Ottoman Sultan. In 1869 he again paid a visit to England. When the canal finally opened, Ismail held a festival of unprecedented scope, inviting dignitaries from around the world.

Suez Canal
These developments - especially the costly war with Ethiopia - left Egypt in deep debt to the European powers, and they used this position to wring concessions out of Ismail. One of the most unpopular among Egyptians was the new system of mixed courts, by which Europeans were tried by judges from their own nation. But at length the inevitable financial crisis came. A national debt of over one hundred million pounds sterling (as opposed to three millions when he became viceroy) had been incurred by the khedive, whose fundamental idea of liquidating his borrowings was to borrow at increased interest. The bond-holders became restive. Judgments were given against the khedive in the international tribunals. When he could raise no more loans, he sold his Suez Canal shares (in 1875) to the British Government for only £ 3,976,582; this was immediately followed by the beginning of foreign intervention.
In December 1875, Stephen Cave was sent out by the British government to inquire into the finances of Egypt, and in April 1876 his report was published, advising that in view of the waste and extravagance it was necessary for foreign Powers to interfere in order to restore credit. The result was the establishment of the Caisse de la Dette. In October, George Goschen and Joubert made a further investigation, which resulted in the establishment of Anglo-French control over finances and the government. A further commission of inquiry by Major Baring (afterwards 1st Earl of Cromer) and others in 1878 culminated in Ismail making over his estates to the nation and accepting the position of a constitutional sovereign, with Nubar as premier, Charles Rivers Wilson as finance minister, and de Bhigriires as minister of public works.