4 SOCIAL SCIENTIST However, as a proportion of the value of world imports. Fund quotas have been on the decline. The ratio of quotas to world imports averaged about 10 percent in the period 1960-65 ; it is now down to a little more than 3 percent. While it is (rue that the expansion in Fund quotas has occurred much more frequently in recent years than was the case in the past, in relation not only to the expansion in world trade but also to the escalation in payments imbalances, quotas have expanded rather tardily. According to an UNCTAD study, from an average of 84 percent in the period 1966-70, the ratio of the quotas to the sum of the current payments imbalances fell to 39 percent during 1971-75 and to 27 percent in the five years thereafter. Also, the Fund quotas have not kept pace with the expansion in international reserves and commercial bank leading. From 1970 to the end of 1984, while international reserves increased eight-fold and commercial bank lending increased by a multiple of ten the Fund quotas barely tripled. Naturally, therefore the Fund's capacity to cope with payments imbalances has suffered a severe decline relative to other sources of payments finance. The increase in quotas, whatever its magnitude, has the effect of raising the size of the pool of national currencies at the disposal of the IMF and thereby of improving the institution's ability to extend payments support to its member countries in payments deficit. But while the quota increase certainly can be said to multilateralise extension of international credit, it cannot be said to multilateralise the generation of international liquidity. The generation of international liquidity, be it noted, remains the responsibility of individual countries, when IMF's quotas are expanded. Therefore since every time a quota increase is agreed upon, it has an implication for the budget of each member country, member countries with sizeable quotas can always take cover behind domestic budgetary policy compulsions to veto the expansion of quotas, no matter how urgent the need for such expansion is on objective international considerations. The Reagan Administration has incurred budgetary deficits totalling over $ 1,000 billion but it refused to agree to a more than $ 35 billion increase in IMF quotas in 1983 and has stalled discussion of any further increases ever since. The dominant view so far has been that quota subscriptions should be "the primary source of the Fund's financial resources". This is open to serious objection on several other grounds as well. Experience has shown that, by being tied down to quotas, the Fund's resources failed to expand not only in relation to world trade but also sufficiently to cope with the demands arising from the switch over from the fixed to floating exchange rates in the early 70s. What should be a cause of serious rethinking, is that, while all fears with respect to the inflationary consequence of an uncontrolled expansion in international liquidity had b^ep ooncentr^ted on