A man holds Ghana's cedi notes in Accra in this file picture.

Accra - New measures by Ghana's government to stabilise 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 year.

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. - Reuters