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 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.

U.S. ECONOMY

On the question of the pace of recovery across the advanced economies, Macklem said the recovery in United States was likely to be a lengthy process.

Our base case is that Europe will take the actions needed to support recovery and even the U.S. recovery is going to be modest. It will be a slow recovery, Macklem said, while answering questions from the audience.

Data on Tuesday showed factory output in the U.S. central Atlantic region had dropped to a two-year low in August and new home sales hit a five-month low in July, the latest signs to suggest the U.S. economy is at risk of stalling.

U.S. Federal Reserve Chairman Ben Bernanke is due to deliver a keynote address at a gathering of global bankers in Jackson Hole, Wyo., Friday.

Some traders expect Bernanke to announce emergency measures to support the sagging economy, but he may only outline gradualist steps, such as how the Fed could tweak its balance sheet as a way to put further downward pressure on medium- and long-term interest rates.

(Reporting by David Ljunggren,; Shamik Paul and Swati Bhat;Editing by Clarence Fernandez)