* Ghana's currency has fallen 7 pct in 2014
* Falling cedi alarms importers, tempers economic optimism
* Government set to miss main fiscal targets for 2013
(Adds quotes from president, details)
By Matthew Mpoke Bigg
ACCRA, Feb 11 New measures by Ghana's government
to stabilize the cedi currency, which has fallen sharply
so far this year, will take time to have an effect and inflation
may rise further in the short term, Finance Minister Seth
Terkper said on Tuesday.
Many economists say the currency's decline is a leading
indicator of broader fiscal problems in a country that exports
gold, oil and cocoa and has acquired a reputation for strong GDP
growth coupled with stable democracy.
Inflation hit a fresh three-year high in December to stand
at 13.5 percent, while the currency has fallen 6.81 percent this
year after a nearly 20 percent drop last year, according to
Thomson Reuters data.
"Inflation might rise but it will find its level again,"
Terkper told reporters. "When we get out of the dry season,
(inflation) will go down," he added, referring to a weather
pattern which lasts until June.
The central bank last week announced new rules to tighten
foreign exchange dealing, including banning the use of the
dollar for domestic transactions.
The drop in the local currency has alarmed importers and
ordinary Ghanaians alike, puncturing an air of optimism that
prevailed since 2010 when the West African state began producing
oil, boosting its GDP growth to above 14 percent the following
President John Mahama attempted to reassure investors and
sought to put the decline in the context of broader economic
changes the government is making in a bid to steer it away from
over-reliance on imports.
Mahama cited Nigeria, which is the region's biggest economy
and the continent's largest oil exporter, as an example of a
country whose economic diversification Ghana hopes to emulate.
"One of the visions of this government is to change the
structure of the economy and create more pillars for the economy
to stand on so that we don't have a situation where ... (we
depend on) a narrow band of primary commodities," he said.
"This government is serious about the reforms we are
carrying out and we believe that it would yield dividends in the
medium to long term, but certainly in the short term we need to
continue to adjust and make these corrections," he told
reporters at a forum.
To that end, the government would seek to sustain the
measures it had already adopted rather than imposing anything
new, he added.
Last week, the central bank raised interest rates by 200
basis points to 18 percent, a move broadly welcomed and expected
by analysts, though Fitch Ratings said it had a growing concern
about economic imbalances.
Chief among these is the budget deficit, which is expected
to stand at 10.2 percent of GDP in full-year 2013, overshooting
the government's target.
Some economists argue the government needs to take more
drastic fiscal action, both to reassure investors and markets as
well as to reach its own target of narrowing the budget deficit
to 9.5 percent by the end of 2014.
Terkper said the government likely missed its 2013 fiscal
targets on inflation and the deficit because of a power supply
crisis, the impact of earlier public sector wage reforms, a
shortfall in oil tax revenue as well as falling global commodity
prices for gold and cocoa.
(Additional reporting by Kwasi Kpodo; editing by Emma Farge and