WORLD MONETARY REFORMS : SOME NEEDED INITIATIVES 5 the Fund, hardly any step was taken to restrain and regulate the expansion of international liquidity through national currencies and commercial bank credit. This way of managing world finance needs radically to be altered. Instead, it is absolutely necessary that the Fund, or whatever other multilateral institution it is decided upto to entrust this task with, should, in order to be in a position to perform a pivotal role in world finance, be made the real fountainhead of international liquidity. In this context, quota subscriptions to the Fund will have to be treated more like the equity capital of a commercial bank and the Fund given wide powers both to create its liabilities of lOUs and thereby to generate international liquidity, subject, of course, to very clear guideliness which guard against inflationary expansion, and also to regulate and restrain the generation of such liquidity in other quarters. II. Issue and Allocation of SDRs When the decision for the first issue of Special Drawing Rights (SDRs) was taken in 1968, it was heralded as a major step in the direction of multilateralising international liquidity and reducing the dependence for that purpose on national currencies. The Fund management itself had hoped at the time that when the allocation of the SDRs to the tune of 9.5 billion, then agreed upon, was completed, they would represent some 16 to 17 percent of the world monetary reserves and that, as a consequence, it would prevent the dependence of the world monetary system on the creation of currency reserves. Actually, by the time the allocation of SDRs was completed in 1972 the world foreign exchange reserves alone had in-increased to $104 billion. As a proportion of world non-gold monetary reserves, the SDRs stood at a mere 6 percent in 1972. Inclusive of gold reserves, valued at market prices, only 4 percent of world monetary reserves were accounted for by SDRs. The second issue of SDRs to the tune of 12 billion over the three-year period, 1979-81, could be agreed upon after a lapse of ten years, while the world financial system was flooded with liquidity generated by the national currency authorities and the commercial banks. At the end of 1981, only 2.5 percent of the aggregate monetary reserves (including gold reserves) comprised SDRs, in spite of the second issue Thus not only were the hopes set initially on the SDRs falsified by the events but also the belief then entertained that the dominant view had at long last conceded the need for a substantial generation of international liquidity multilaterally proved to be short-lived. It is important to note in our context that agreement on the issue of SDRs by the IMF was part of the package which stipulated at the same time ho ^ the SDRs would be allocated among th^ Fund's member countries. The SDRs were to be allocated to the member countries in the same proportion as their quotas. This meant not only that almost 70 percent of the SDHs would be: ^lloc^ted to the industrial countries but al§o that tho