By Gernot Heller and David Dolan
ANKARA (Reuters) - World financial leaders agreed on Saturday that over reliance on cheap cash from loose central bank monetary policy will not lead to balanced economic growth and that as activity picks up, interest rates would have to rise.
Instead, G20 governments agreed that they should focus more on what they themselves can do to boost growth, Britain's Finance Minister George Osborne told Reuters.
"What I think we're all agreeing on is that there does need to be, alongside the very accommodative monetary policy in many countries you see, real structural reforms," he said.
The formulation of the final communique of finance ministers and central bank governors from the world's top 20 economies defies pressure from emerging market countries to brand an expected rate rise in the United States as a risk to growth.
"Monetary policies will continue to support economic activity consistent with central banks' mandates, but monetary policy alone cannot lead to balanced growth," the G20 communique said.
"We note that in line with the improving economic outlook, monetary policy tightening is more likely in some advanced economies," the statement said.
To limit the volatility of capital flows from emerging economies into dollars -- the reason for emerging market concern about a future Federal Reserve hike -- the G20 financial leaders said they would avoid any surprise or excessive moves.
"We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to minimise negative spillovers, mitigate uncertainty and promote transparency," the G20 said.
Concern about the outflow of capital from emerging markets to advanced economy safe havens like the U.S. was amplified by investor worries over a possible economic slowdown in China, the world's second biggest economy.
The G20 communique welcomed strengthening activity in some economies but said that growth fell short of expectations.
"We have pledged to take decisive action to keep the economic recovery on track and we are confident the global economic recovery will gain speed," the statement said.
The communique also indirectly addressed the devaluation by China of its renminbi currency in August, a move some many in the G20 see as a realignment to market rates rather than a move to help exports.
"We reiterate our commitment to move toward more market determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments. We will refrain from competitive devaluations and resist all forms of protectionism," it said.
To boost global growth over the next five years by a further 2 percent above what was already expected, G20 countries agreed last year in Brisbane that they would launch structural reforms and invest in a coordinated way.
They were behind schedule, the communique said.
"...We are making progress towards our commitments (but)... more effort is needed for implementation," the statement said.
"It's a call to everybody to accelerate," Angel Gurria, secretary-general of the Organisation for Economic Cooperation and Development, said.
The task was made more difficult by weaker global growth, Canadian Finance Minister Joe Oliver told reporters.
"We're making progress, but the base that we hoped we would have, we haven't arrived at because the growth has been disappointing and the projections have been downgraded," Oliver said, adding that one-third of the G20's extra growth commitments have been implemented.
Boosting investment was key, the G20 financial leaders agreed. Governments will prepare their final investment strategies by November, when G20 leaders are to meet to discuss them in Antalya in Turkey.
(Addijtional reportin by Randall Palmer and Nick Tattersall in Ankara; Writing by Jan Strupczewski)
