The IMF says plans to reduce government debt are holding the economy back. It's the most forthright criticism yet of Osborne's austerity.
The Chancellor has defended his recession-busting approach, and his record on taxing the rich, on the sidelines of the IMF meeting in Tokyo.
Sir Mervyn King will concede there might be occasions when the Bank of England should 'aim off' the 2% inflation target.
George Osborne is braced for the International Monetary Fund's (IMF) verdict on Britain's economic prospects.In its annual healthcheck on UK plc, the IMF is expected to suggest that deficit reduction should be slowed amid weak growth.
The IMF was previously among the strongest backers of the Chancellor's economic strategy, but has gradually changed its tone in response to dwindling growth forecasts.
The organisation's head, Christine Lagarde, has insisted she still supports the Government's policy. But she added that "should growth be particularly low... there should be consideration to adjusting by way of slowing the pace".
Bank reforms and tax evasion will lead the agenda at a meeting of G7 finance ministers, which is being chaired by George Osborne at a country house in Buckinghamshire.
Future Governor of the Bank of England Mark Carney and IMF managing director Christine Lagarde are among those attending the two-day talks.
The IMF, which will soon issue its annual health check of the UK, has already suggested the Chancellor must be more flexible with his deficit-reduction plans.
Mr Osborne conceded prior to this weekend's talks that meetings between the larger G20 group - which includes emerging economic forces like China, India and Brazil - play a greater role in "setting the global rules of the game".
But he insisted the G7 nations - the United States, Germany, Japan, the UK, Italy, France and Canada - still wield "major economic firepower".
The International Monetary Fund (IMF) said British hopes for an export-led economic recovery are being hit as "declining productivity growth and high unit labour costs are holding back much needed external rebalancing".
The IMF suggested alternatives policy responses as it slashed the UK's growth forecasts for this year and the next.
Its report stated:
In the United Kingdom, other forms of monetary easing could be considered, including the purchase of private sector assets and greater transparency on the likely future monetary stance.
Greater near-term flexibility in the path of fiscal adjustment should be considered in the light of lacklustre private demand.
The International Monetary Fund (IMF) has suggested Chancellor George Osborne should consider changing his austerity plans in the light of "lacklustre" private demand.
In its World Economic Outlook report, the IMF also suggested further action should be taken on monetary policy, potentially including the purchase of private sector assets.
"In the United Kingdom, the recovery is progressing slowly, notably in the context of weak external demand and ongoing fiscal consolidation", the report states.
The IMF noted that rebalancing from the public to private sector was "being held back by deleveraging, tight credit conditions and economic uncertainty".
The International Monetary Fund (IMF) has slashed the UK's growth forecasts for 2013 and 2014 and warned that the private sector is being hampered by a lack of credit and economic uncertainty.
The IMF cut this year's forecast growth from one percent to 0.7 percent, while cutting the projection for 2014 from 1.9 percent to 1.5 percent.
The body noted that the UK's financial recovery was "progressing slowly".
Egypt is seeking to increase its previously-requested £3.2m loan from the International Monetary Fund to cover its soaring budget deficit, the planning minister said in comments carried by two local newspapers today.
"Egypt will intensify its efforts in the spring meetings of the IMF in the period from April 16-21 to receive additional funding to cover the financing deficit until mid-2015," Ashraf El-Araby said in the Al Masry Al Youm newspaper.
"There are ongoing discussions to increase the loan, estimated at $4.8 billion but it may rise, especially with the increase in the budget deficit to $20 billion," he was quoted as saying.
The minister told Al-Mal daily financial newspaper that if a deal with the IMF is not reached before May, talks will be postponed until October when parliamentary elections are expected to start. An IMF delegation is currently in Cairo for loan talks.
An Egyptian Government spokesperson has told Reuters that a team from the International Monetary Fund will visit the country on Wednesday to discuss the details of a $4.8 billion loan.
The spokesperson denied that the country was in crisis and instead insisted it was discussing the loan so it could "import essential commodities".
An International Monetary Fund delegation will arrive in Egypt on Wednesday for talks with the government on a $4.8bn (£3.2bn) loan, Egypt's government spokesman Alaa El Hadidi said today.
More than two years of political upheaval have battered the Egyptian economy, leaving it in dire need of IMF funding to relieve a currency and budget crisis.
President Mohamed Mursi's government initialled a deal with the IMF last November but postponed final ratification in December in the face of unrest triggered by a political row over the extent of his powers.
International Monetary Fund (IMF) chief Christine Lagarde said the rescue deal agreed for Cyprus is "sustainable" and financially sound.
Although the plan allows the IMF to make a contribution to the loan, Ms Lagarde said it was too early to say how much the lender would provide towards the package.
"We believe the proposal is sustainable for the Cyprus economy ... The IMF is considering proposing a contribution to the financing of this package", she told a news conference.
"The exact amount is not yet specified. It will take some time," Ms Lagarde added.