The International Monetary Fund (IMF) remains optimistic about Malawi's economy despite increasing anxiety among Malawians about the future.

In an Economic Health Check write up on Malawi ahead of the IMF/World Bank Annual Meetings which starts this week in Tokyo, Japan, IMF African Department's senior economists Olumuyiwa Adedeji and Manuk Ghazanchyan believe the Malawi economy would bounce back into stability by early 2013.

Finance Minister Ken Lipenga, Economic Planning Minister Atupele Muluzi and Reserve Bank of Malawi Governor Charles Chuka are representing Malawi at the meetings.

"Malawi's fiscal and monetary policies are expected to put inflation back on a downward path by early 2013 while leaving room for increased growth and social spending," writes Adedeji and Ghazanchyan on the IMF website.

The two experts observe that the Malawi government has taken bold steps to counter foreign exchange shortages and is running a programme with the IMF which balances the need to lower inflation with goal of higher social spending.

It says the new policies stress public financial management and better business climate, among other things.

The IMF Executive Board approved a new US$156 million loan package to Malawi to support a program aimed at reviving economic growth and scaling up government social protection programmes.

The loan, under a three year Extended Credit Facility arrangement approved July 23, backs programme objectives that include low inflation, increasing international reserves, and reforms to expand financial services and improve the investment climate in order to promote sustained inclusive growth.

In its regular review of Malawi's economy, the IMF said recent policy measures implemented by the authorities will help boost export earnings and foreign assistance, slow down the growth of imports, and help the authorities build up international reserves to provide a buffer against external shocks.

Adedeji and Ghazanchyan observes that international reserves had fallen to precariously low levels by early 2012 and that after hovering around the equivalent of one month of imports during most of 2011, reserves fell to about half a month of imports by April 2012.

They, however, say that after experiencing a smooth transition to a new government following the sudden death of President Mutharika in April 2012, the new administration led by President Joyce Banda moved swiftly to address the country's chronic foreign exchange problems.

Among other things, the IMF economists mention the devaluation of the kwacha, adoption of a flexible exchange rate regime, removal of restrictions on foreign exchange transactions and adoption of an automatic fuel price adjustment mechanism to ensure that prices reflect their true import costs as among key policies that should restore economic viability in the country.

The Annual Meetings of the IMF and the World Bank Group bring together central bankers, ministers of finance and development, private sector executives, civil society, and academics to discuss issues of global concern, including the world economic outlook, global financial stability, poverty eradication, jobs and growth, economic development, and aid effectiveness.

The Meetings also offer an opportunity for civil society organisations to share their views and interact with policymakers in a global setting.

The summit of the meetings will take place from Friday October 12 to Sunday October 14 boards of governors of the IMF and the World Bank Group will meet jointly to decide on major policy issues related to the future work of the two institutions.

The board of governors for each institution consists of one governor from each of the institutions' member countries, typically the finance minister, central bank governor, or minister of development.