The aim of this paper is to present the first ever study of the balance of payments in the Second Republic of Poland.

The balance of payments in the inter-war period strongly indicates the degree of complexity of the conditions with which the Polish economy was faced. War to secure the country's borders, hyper-inflation, currency reform and immediate destabilisation of the Polish zloty, followed by the stabilisation of the currency and a short period of fast growth facilitated by the inflow of foreign capital, another serious economic depression and capital outflow, and finally the introduction of foreign currency monitoring accompanied by the economic growth enhanced by the intervention policy - all determined the evolution of the economy, the balance of payments and the balance of the stock of external financial assets and liabilities.

The key element in current operations was the export of goods and commodities. This was relatively low and ineffectual. During the period of enhanced growth, exports were much lower than imports, which caused a substantial trade balance deficit. The depression, and then the period of foreign currency purchases controls were both characterised by a strong tendency to balance import/export levels, or even to reach a trade surplus, despite capital outflow.

Services were of secondary importance, yet it should be noted that here the balance usually was positive. Until the mid-twenties, the relatively high surplus, due to huge transfers from emigrants, was even higher than the deficit on the income side, i.e. yields on capital inflow. Then the situation was reversed.

These trends in current transactions usually resulted in a negative balance, with a few exceptions, in the twenties, whilst the thirties witnessed small surplus amounts. A reverse trend was noticed in the financial account. Until 1929, it had been positive as a result of capital inflow, thereafter, with the capital outflow, it became negative.

Large notional amounts of money in the balance-of-payments had their source in errors and omissions. To some extent they resulted from deficiencies in the statistical methods of the time. In some years, large amounts of money meant undisclosed income resulting from the private hoarding of gold and foreign assets. In some other years, as a result of buying-in carried out by the issuing institution, these values augmented reserves.

The reserves of the issuing body experienced serious fluctuations. They reached their peak level at the time of statutory stabilisation of the zloty in 1927. Then, after the period of continuous decrease in reserves, which were used to maintain the balance of payments in the following years, the stability of these reserves was restored with the introduction of foreign currency controls in 1936.

The comparison of the stock of external financial assets and liabilities showed a stable and considerable predominance of foreign capital. It reached its peak just before the great depression and gradually diminished in the following years, to reach the level of the mid-twenties. Political events, economic trends and currency instability determined the direction of the capital movements - its inflow or outflow. In the years 1918 - 20, and 1936 - 39, Poland, for political reasons, was given loans mainly to improve its military forces. The loans granted in the years 1924 - 25 and 1927 - 29 were connected with the stabilising of the currency and with the positive trends that followed this stabilisation. It should be noted, though, that during the unstable inter-war period Poland was perceived as a country interposed between Russia and Germany, which meant higher investment risk. The balance of payments in the Second Republic of Poland seems to confirm this bitter reflection.