Higher interest rates may also be needed to take the heat out of the 'overshooting' housing market and prevent a new crash, the watchdog added in its report on the
The warnings came just days after the Fund predicted that
'The economy has rebounded strongly and prospects are promising,' the IMF said.
The annual deficit has fallen since it peaked at over
The national debt has also topped
The IMF said that the Coalition's current budget plans are 'appropriate' but warned that whoever is in power after the election in May faces 'difficult choices' to finish the job of repairing the public finances.
'High deficits and rising debt mean that fiscal consolidation needs to continue,' it said.
'There is a clear need to put debt on a downward path to ensure long-term fiscal sustainability.'
The IMF also warned that sterling is too strong and is holding back exports. The global watchdog said the pound is overvalued by between 5pc and 10pc, having risen sharply over the past 12 months when it gained around 13pc against the dollar and 10pc against the euro.
It warned the strength of the currency is making British exports uncompetitive and preventing the long-awaited rebalancing away from domestic spending.
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