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%, 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" stabilisation policy rather than resort to an IMF financial assistance programme.

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%.

The government held a strategic planning meeting last month but is yet to announce new reforms. Instead, it is urging patience and pointing to measures to tighten foreign exchange rules and raise rates, coupled with subsidy cuts last year.

Officials also say a Eurobond to be issued in U.S. dollars in July will lower debt costs while seasonal cocoa inflows will steady a currency that has fallen 28% this year, the steepest decline in Africa. They also say that Ghana's mid-term prospects remain strong.

In the meantime, ordinary people are feeling the pinch, particularly with inflation running at 14.8%.

Anastancia Bokpe, who operates a restaurant in the East Legon suburb of the capital, said she has been forced to nearly double the price of her popular goat soup.

As a result, she fears losing the custom of the office workers, builders and civil servants who patronise her business because they too are under financial pressure.

"Prices of ingredients in the market have been changing almost every month .... The only way I could still remain in business is to pass on a fraction of the price hikes to the consumer," she told Reuters.

"We are already in a severe hardship and things are rather getting worse."

For their part, economists lament what they say is government indecision dating back to November's annual budget.

"There have been no fiscal reforms that suggest the deficit will narrow significantly this year," said Yvonne Mhango of Renaissance Capital in Johannesburg.

Authorities aborted two auctions of longer-dated bonds due to high yields and concerns of risk-averse portfolio investors. Yields on the weekly auction are at a three-year high.

Central bank governor Henry Kofi Wampah said the bank was funding the deficit but that the amounts fell within the allowed limit of 10% of revenue collection and any excess would be redressed by the end of the year.

"We know the government is about to issue a Eurobond soon, which we can use to replace the financing we have made, so it's not out of the ordinary or abnormal for us to provide the government’s financing needs at this time," Wampah told Reuters.

Carmen Altenkirch, director of Africa ratings at Fitch, said money printing to fund the deficit would only raise pressure on inflation and a currency that has fallen 28% this year.

The risk is that the government is forced to defend the currency with still higher rates, causing inflation and a spiral that will blunt growth projected to slow to 4.5% in 2014. As a result, there are few easy options.

"The debt situation may now be so grave that the policy priority above almost everything else should be to contain it," said Razia Khan, head of Africa research at Standard Chartered. Mild inflation growth might be a better policy option, she said.

One impediment to reform is stiff competition between the ruling National Democratic Congress (NDC) and the opposition.

Governments in Ghana, unlike in many other African states, are regularly ejected by voters at elections. The peaceful transitions are a source of national strength and pride, but they also make governments more vulnerable to voter sentiment.

The next election is not until 2016 but politicians say austerity is unpopular with voters, especially given expectations of a bonanza when oil came on-stream in 2010.

Ironically, each election year also tends to see a weakening of the fiscal position, as it does in many countries, so the window for restoring fiscal balance is closing fast ahead of 2016.

The opposition New Patriotic Party (NPP) only narrowly lost the last presidential election and this week it stepped up its criticism of what it said was government economic mismanagement. At the same time, party supporters took to the streets in its stronghold city of Kumasi last week to protest against the hardship.

"I would want to see the government under an IMF programme because on their own they haven't shown the commitment to do the right things," said NPP finance spokesman Mark Assibey-Yeboah.

Some commentators have called for a national consensus over fiscal policy given the situation. But they acknowledge this is unlikely in the political climate.