The head of the International Monetary Fund says Canada has the fiscal room to make productivity-boosting investments, and praised the federal government’s proposed changes to budget timing.

“Both Germany and Canada recognize that in this very testing time, they need to use their fiscal space,” Managing director Kristalina Georgieva said at a news conference during the IMF’s meetings in Washington, D.C., on Thursday.

The two countries are in better fiscal positions than their Group of Seven peers, including the U.S. and Italy, whose governments should be more focused on consolidating their public debt, she said.

Georgieva also said the IMF “welcomes” Canada’s planned focus on housing, infrastructure, energy and other strategic projects, saying spending in these areas will help to boost productivity.

The comments will likely add to rising optimism about Prime Minister Mark Carney ’s plan to run deeper deficits and shift expenditures to the defense sector and creating conditions favorable for business investment.

In recent weeks, business groups, economists and policymakers have all expressed varying degrees of support for using the country’s fiscal position to draw investment back into the northern nation, which has languished for nearly a decade.

On Wednesday, a chief executive officer of one of the country’s largest lenders said federal government should go further and cut taxes, even if it means larger shortfalls.

Georgieva also applauded Carney’s plan to permanently move the budget to the fall and to separate capital investments and operating expenses on its balance sheet.

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Finance Minister Francois-Philippe Champagne will deliver the budget on Nov. 4. Economists surveyed by Bloomberg see the deficit rising to $70 billion, though some economist put the shortfall closer to $100 billion, about three per cent of the country’s