Canadian Finance Minister Jim Flaherty on Monday welcomed the International Monetary Fund's (IMF) support for the government's plan to return to balanced budgets in the medium term.
"Thanks to our sound and stable economy and measures taken in the Next Phase of Canada's Economic Action Plan, the IMF is maintaining its positive outlook for Canada," said Flaherty.
"Given that global economic growth has weakened, the IMF continues to support our flexible and pragmatic approach to returning to balanced budgets in the medium term," he said.
In a statement dated one week ago, IMF presented an overall profile of Canada's moderating growth and broadly favorable outlook, outlining the country's monetary and fiscal policies, and expressing its support to Canada's objective of returning to a stronger fiscal position in the medium term.
Canada is pushing forward its consolidation plans, which aim at budgetary balance by 2015/16, relying on the expiration of stimulus measures, a strict containment of current spending growth, as well as higher revenues as the economy expands.
"This is necessary to put gross and net public debt on a declining path relative to GDP, thus placing public finances on a stronger footing to deal with the long-term spending pressures from population aging and the rise in health-care costs," IMF said in the statement.
IMF endorsed the measures taken by the Canadian government to promote the long-term stability of Canada's housing market, including changes in the rules for government-backed insured mortgages.
However, it said if household debt and house prices continue to rise much more rapidly than disposable income, further macro- prudential measures may be needed to prevent a more disruptive adjustment down the road.
IMF praised Canada's banking sector for its good supervision and solid position, saying that the banks are well capitalized for the transition to Basel III requirements, and the authorities maintain high prudential standards and rigorous supervision.
The IMF also welcomes Canada's intention to launch a Canadian securities regulator. "The regulation of security markets at the national level would strengthen oversight and enrich an already strong institutional financial stability framework," it said.
The IMF reviews the economic developments and policies of each member country, usually on an annual basis.