Written by Matthew Mpoke Bigg and Kwasi Kpodo | From Reuters

Rising bond yields, mounting inflation and a weakening currency have taken the shine off Ghana, a country until recently hailed as a model for African growth.

An oil boom helped fuel five years of GDP growth above 8 percent making Ghana an emerging market star, a stable democracy whose population of 25 million was moving steadily into middle income status.

It is now, however, paying a steep price for not coming through with a new tranche of fiscal reforms. Political consensus is stymied, the public is dismayed by rising costs and the dream of new wealth is on hold.

Analysts put the immediate difficulty down to a delay in announcing reforms, saying it makes it harder for the government to meet its 2014 economic targets and has increased the chance it will eventually need a bailout from the International Monetary Fund (IMF).

It has also created a perception of policy drift at a time of economic trouble rather than decisive action to shore up gains made during the boom years in which the gold and cocoa exporter started pumping oil.

“The situation is becoming quite critical. There has been a chronic underestimation of the seriousness of the problem by the authorities,” said Angus Downie, head of economic research at Ecobank.

In May, faced with worsening economic indicators and rising calls for action, the government of President John Mahama said it would adopt a “home grown” stabilization policy rather than resort to an IMF financial assistance program.

Such a policy would necessarily include spending cuts, steps for increasing revenue and an answer to costly public sector wages, the single biggest contributor to the rise of the deficit in 2012 to 11.8 percent.

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