Pakistan's rupee drops to record low on reports IMF tranche talks failed

KARACHI, Pakistan, Oct 18 (Reuters) - Pakistan’s rupee hit a record low on Monday of 173.20 in intra-day trading against the U.S. dollar before closing at 172.78, below the previous close of 171.18, after reports of a failure of talks with the International Monetary Fund, traders said.

The government’s finance ministry on Monday dismissed reports by local media over the weekend that talks from October 4 to 15 for the release of a $1 billion loan tranche were inconclusive.

“Negotiations between Pakistan and IMF are moving forward positively. No timeframe was set at any stage for the conclusion of the talks,” a statement issued by finance ministry said.

In June, a similar round of talks between the two sides failed to bring agreement on conditions for the tranche.

“The uncertainty regarding the IMF program after news reports emerged that Pakistan and IMF have failed to agree on certain conditions has resulted in today’s depreciation of rupee,” Atif Zafar, chief economist and director at Topline Securities told Reuters.

Last month, Fitch Ratings revised down its forecasts for the Pakistani rupee for both this year and next due to a variety of factors including an increased flow of U.S. dollars into neighbouring Afghanistan.

Fitch’s forecast for the rupee’s average rate this year is now 164 to the U.S. dollar compared with 158 previously. For 2022, Fitch expects an average rate of 180 versus a previous forecast of 165.

The State Bank of Pakistan earlier indicated that the dollar could appreciate during the current financial year due to an expected higher current account deficit. (Reporting by Raza Hassan; editing by Philippa Fletcher)