The correct answer is 2 and 4 only Key Points The SDR was created by the IMF in 1969 as a supplementary international reserve asset, in the context of the Bretton Woods fixed exchange rate system. Hence, statement 1 is incorrect. A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase its domestic currency in foreign exchange markets, as required to maintain its exchange rate. Hence, statement 2 is correct. The value of the SDR is based on a basket of five major currencies—the US dollar, the euro, the Chinese renminbi (RMB), the Japanese yen, and the British pound sterling. No gold backing is needed. Hence, statement 3 is incorrect. The SDR is neither a currency, nor a claim on the IMF. Hence, statement 4 is correct. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions.