G20 must do more to fix imbalances, U.S. recovery seen: BoC
MUMBAI (Reuters) - The Group of 20 leading and emerging nations has not done enough to correct global imbalances and this could provoke more financial instability, a top Bank of Canada official said on Wednesday.
Tiff Macklem, the bank's senior deputy governor, said in a speech that some G20 nations had not lived up to promises they made at a Toronto summit last year to starting tackling their deficits and debts.
"While the G20 has made considerable progress in strengthening the microeconomic rules governing the regulated financial system, we have fallen short in correcting the imbalances that are plaguing the global economy," he said.
"This is having consequences. The slow progress by some countries in implementing adjustments needed to address macroeconomic imbalances is holding back the global recovery and increasing the risk of financial instability."
Canada and India chair a G20 working group on developing a plan for strong, sustainable and balanced growth, an area where Macklem said the grouping had not done enough.
"In advanced countries, the difficult task of legislating credible, well-defined fiscal consolidation plans is under way, but in some of these countries, current plans have yet to gain the full confidence of markets," he said.
"Moreover, the consequences of inadequate progress have become more immediate. Sovereign debt concerns have contributed to a retrenchment in risk-taking in global markets, sending the prices of safe-haven assets to record highs and pushing those of risky assets sharply lower."
Emerging market members of the G20 are accumulating foreign reserves at an increasing rate and, in 2010, these reserves had reached nearly $5 trillion, or 32 percent of their GDP, Macklem said.
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