Nov. 12 (Bloomberg) -- Canada should keep “accommodative” economic policies to foster a recovery threatened by weak global growth and further strength in the country’s dollar, the International Monetary Fund said.

Government spending, tax cuts and a record low rate at the Bank of Canada are sustaining domestic demand through a recession that created “sizeable slack” in the economy, Charles Kramer, the IMF’s Canada mission chief, said in a statement after a staff visit.

Canada is “relatively well positioned to resume an expansion,” Kramer said in the statement. “It will be essential to maintain a highly accommodative macroeconomic policy stance as intended until the economic recovery is firmly established, in light of risks on the horizon.”

The IMF cited “weaker-than-expected global growth and a further strengthening of the Canadian dollar” as risks to the country’s outlook.

Prime Minister Stephen Harper’s Conservative government has budgeted a record C$55.9 billion ($53.3 billion) deficit this year on infrastructure spending and higher jobless benefits, to ease the country’s first recession since 1992. The Bank of Canada says the recession ended in the third quarter, and has pledged to keep its key interest rate at 0.25 percent through June 2010 unless the inflation outlook shifts.

Bank Governor Mark Carney and Finance Minister Jim Flaherty have said that volatility in the country’s dollar is making it harder for local businesses to succeed. Carney has also said he has “options” to slow the currency’s rise if it threatens his 2 percent inflation target.

The Canadian dollar has gained 16 percent against its U.S. counterpart this year, making exports less competitive. Today it depreciated 0.3 percent to C$1.0482 per U.S. dollar at 10:55 a.m. in Toronto, from C$1.0449 yesterday.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

Last Updated: November 12, 2009 11:12 EST