Large balance-of-payments deficits give the administration good reasons to expand in order to cope with various disturbances, structural inadequacies, bottlenecks, and economic disproportions. The poor balance-of-payments position before 1965-66 was one of the direct reasons for the economic reform although its specific nature and the period over which it was to be achieved were not precisely defined. This chapter reviews fours groups of factors and their role in shaping the Yugoslav balance of payments. The first group relates to the long-term development trend and the second group includes the international, economic, financial, and political environment. The third group relates to various institutional solutions offered by prevailing foreign trade and foreign exchange systems producing different influences on the characteristics and overall stability of the country's balance of payments. Finally, practical economic policy measures, in the foreign trade sector and other sectors, may directly or indirectly determine the current balance-of-payments situation.