The IMF predicted the economy will shrink by 0.4% this year - a downgrade from three months ago, when growth of 0.2% was predicted for the year.
But David Cameron rejected calls for a change in the Government's economic strategy.
"What we need in Britain is not plan B - which is more borrowing," he told Sky News.
"How can you borrow your way out of a debt crisis if the problem was created by too much spending, too much borrowing, too much debt?
"What we need is what I call Plan A+. We need to keep our plans - difficult though they are - to cut public spending and deal with the deficit.
"But we need to add to that every measure that business has been asking for, and that's what we're doing."
The IMF also cut its forecast for economic growth in the UK next year from 1.4% to 1.1%.
The combined cut in both years' economic forecast is greater than any other country in the developed world.
The downgrade, which follows a similar shift from the Organisation for Economic Co-operation and Development (OECD) last month, comes only hours after Chancellor George Osborne pledged at his party conference to persevere with his austerity plans.
In its World Economic Outlook, the fund cut its forecast for economic growth in the world's advanced economies from 2% this year to 1.5%.
But it was Britain that faced greater cuts in the IMF forecast than any of its major fellow economies, including Spain, Italy and other troubled euro economies.
The IMF also revealed that this year, for the first time in the crisis, Britain will have a bigger budget deficit than Greece, as the economic collapse undermines the public finances.
It predicted Britain's overall budget deficit this year would be 8.2% of GDP - higher than Greece's 7.5% of GDP.
But while some have said the IMF's report is a signal that the Government should abandon its austerity policies, the fund continues to approve the coalition's plan.
Jorg Decressin, a senior analyst at the IMF, told Sky News: "The general mix of policy - which is to reduce large fiscal deficit, and to support growth through an accommodative monetary policy and through financial sector reform - is the right way to go.
"And that is what we have seen in the UK over the past few years."
The IMF also said the Bank of England should be left to try to stimulate the economy.
The report, which was published overnight at the IMF's annual meeting in Japan (EUREX: FMJP.EX - news) , said: "In the United Kingdom, further monetary easing through unconventional measures may be necessary, depending on the effects of the easing measures implemented recently.
"With the prospect of somewhat weaker global growth, automatic stabilisers should be allowed to operate fully, and economies with limited fiscal vulnerability should stand ready to implement fiscal contingency measures if large downside risks materialise."
The Chancellor will travel to Tokyo for the IMF meeting later this week. In his conference speech on Monday he said: "It tells you something about just how big it was that the deficit is still higher today than when a British government went begging to the IMF in the 1970s.
"This Wednesday I'm also going to a meeting of the IMF. Don't worry: because of the resolve of the British people, I go representing a country that is seen as part of the solution, not part of the problem. That is only because of the credibility our plans have earned."
Although Britain's economy is currently in recession, and is expected to shrink this year, the Office for National Statistics is likely later this month to reveal that it expanded in the third quarter of the year, ending the technical recession.
However, the Bank of England Governor Sir Mervyn King has warned the economy could well slip back into negative territory, calling this "the zig-zag recovery".
Labour's shadow chancellor Ed Balls said: "Coming just hours after George Osborne complacently insisted he would cling on to his failing plan, these downgraded IMF forecasts are another damaging blow to the Government's economic credibility.
"Twelve months ago the IMF forecast growth of 1.6% in 2012 and said a plan B would be needed if growth were to be lower than expected.
"A year on, with Britain in a double-dip recession, borrowing rising as a result and growth forecast to be minus 0.4%, there can be no question that a change of course is urgently needed."
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