As relations between the two Vietnams grew increasingly hostile, a major fiscal problem in the South became its chief dilemma. Fiscal and other unpopular measures in self-reliance, it was thought, would alienate the population in the short run and reduce the probability of survival of the government. Yet, postponement of those measures would cause more serious problems eventually, because self-reliance is essential to economic development and viability of democratic governments in the long run. The options open to the Vietnamese government were to make the first move toward self-reliance, and then proceed step by step, or to become more and more dependent on aid. Both appeared to be risky and unpromising.

In the late 1950s and early 1960s, South Vietnam was a relatively poor country. Though almost self-sufficient in food, it had a large trade deficit that it was able to manage thanks to U.S. aid. The country had a poor central administration, with little skill or motivation to cope with internal financial problems. The internal war in the early sixties, and later the external war, brought insecurity to the countryside, along with a siphoning of manpower and other resources to military operations.