Canada is among a select group of countries that could easily afford to spend more on economic stimulus, and should stand ready to do so if the global recession deepens, the International Monetary Fund said.

As investors fret for a second day over the prospect of Britain and the United States losing their triple-A borrowing status, the IMF praised Canada's fiscal management, saying successive Liberal and Conservative governments put the country in excellent shape to weather the global recession.

The country's debt level is about 29 per cent of gross domestic product, by far the lowest in the Group of Seven rich industrial nations.

Germany is the second-lowest, at about 58 per cent of GDP, according to the IMF. The ratios in Britain and the U.S. are about 67 per cent and 70 per cent respectively.

“With debt low, Canada would be well positioned to participate in a globally co-ordinated round of further stimulus,” the fund said in its annual review of the country's economy, which was released Friday. “Further fiscal expansion would not put at risk debt sustainability, in view of the credible commitment to medium-term structural surpluses.”

Politically, the assessment could be both a blessing and a curse for Finance Minister Jim Flaherty, who is under pressure from his political opponents, especially New Democratic Party leader Jack Layton, to expand his $40-billion stimulus program.

IMF officials noted that Mr. Flaherty's budget measures, combined with provincial efforts, represent some of the most aggressive spending in the Group of 20 major economies and is “appropriate” for current conditions.

At the same time, the fund appeared to be nudging Canada to take a more prominent role in the struggle to reverse the deepest global recession since the Second World War, which is at odds with Mr. Flaherty's position that his Conservative government has done enough for now.

The report said the IMF's prediction that Canada's economy will rebound next year is shrouded in risk.

A slower-than-expected rebound in the U.S., the possibility of weaker commodity prices and record household debt levels could all cause the economic downturn to persist, the IMF said.

That argues for further spending, especially since unemployment rates continue independent of any of those shocks, said Manmohan Agarwal, senior visiting fellow at the Waterloo, Ont.-based Centre for International Governance Innovation.

“For whatever reason, the Conservative government is very cautious and doesn't appear to want to do much more,” Mr. Agarwal said. “I would be tempted to implement a slightly more aggressive expansionary policy.”

Mr. Flaherty issued a statement saying the IMF's report is a “strong endorsement” of his economic stimulus package.

Speaking in Toronto, he told a business audience that there are “glimmers of hope” that the economy is poised to rebound, citing retail sales, which increased for three consecutive months through March, Statistics Canada reported Friday.

“There are some encouraging signs in the Canadian economy,” Mr. Flaherty said. “We'll see improvement later in the year and into 2010. But this is a difficult year, particularly with respect to unemployment.”

The IMF predicted Canada's unemployment rate will rise to 9.2 per cent in 2010 from 6.2 per cent last year.

Still, Canada's struggles pale in comparison to some of its international rivals.

Standard & Poor's warned this week that Britain is on the verge of losing its premium credit rating, sparking a slump in global stock markets on concern that the United States also is at risk of downgrade.