In a strong endorsement of the government's approach, the IMF said that a "sustainable recovery" was underway.
The news is an early blow to the economic credibility of new Labour leader Ed Miliband, who called the coalition's plan 'economically dangerous' - at odds with the IMF, the CBI and the Governor of the Bank of England.
Last year's IMF report criticised Labour's high borrowing, saying that it was a risk to the recovery.
Chancellor George Osborne said that the IMF's report was "very welcome".
"They have made it pretty clear that the deficit reduction plan that we have set out is essential for bringing about sustainability in our budget. It reminds us that if we divert from the course the new Government has set out then we really will be heading back into a disastrous period of economic instability for Britain."