Johannesburg - A closely fought but peaceful election in Ghana this month has burnished the international image of the west African oil, gold and cocoa producer as "the Switzerland of Africa".But to win economic bragging rights too, Ghana's new government will have to convince investors that it can tame a swelling fiscal deficit, stabilise a volatile currency and rebuild foreign exchange reserves that have declined this year while those of other African economies have grown.Elected President John Dramani Mahama's administration will have to confront these challenges while economic growth slows - albeit to a robust 7.8% projected for 2013, from a blistering 14.5% last year.Then there is the pressure of high expectations from ordinary Ghanaians impatient to see the benefits of oil production, which started in 2010.Investors say they would also like more opportunities to participate in Ghana's capital markets, but the main constraints are a bond yield curve that ends at five years and a small and illiquid stock market with just 34 listed companies."Ghana is one of our favourite places," said Sven Richter, head of frontier markets at Renaissance Asset Managers. "We would have more in Ghana if there was more liquidity. We have less than 1% of our fund there and we'd quite happily have 10%."Despite a legal challenge by the opposition to Mahama's narrow victory earlier this month, the largely incident-free election in a region known for coups and civil wars has given foreign investors comfort."Someone described Ghana to us as the Switzerland of Africa. I think that's an apt description," said Ayo Salami, chief investment officer of asset manager Duet Group's Africa Opportunities Fund. "There seems to be a continuing commitment on the part of the government to institutional reform, to embedding democratic culture. All these are things we like."But the government has to show it is serious about cutting Ghana's twin deficits - on its budget and current account - which are putting pressure on the currency, Salami said, echoing the concerns of credit rating agencies.Continuing an election year trend, heavy public spending forced the government to revise its 2012 budget deficit target to 6.7 % of gross domestic product (GDP), from the original 4.8%. Some analysts think it could end up in double digits when figures are published next year.Fitch, which affirmed Ghana's B+ rating in September, said the gap reflects a combination of repayment of arrears, public sector wage increases and higher energy subsidies.Oil hopesFinance Minister Kwabena Duffuor said last week the country would pursue a fourth year of fiscal consolidation in 2013, expecting oil, agriculture and an infrastructure programme to underpin economic growth. Salami at Duet Group warns, however, against relying too much on oil, even if output is set to increase to 120 000 barrels per day next year, from around 90 000 bpd now."I know the government is hoping or waiting for oil revenues to come as the cavalry over the hill to sort this out for them," he said. "What usually happens is that when governments get a new source of revenue they find a new way to spend it."Ghana's current account deficit is likely to hit 14% this year from 11% last year, due to infrastructure spending and demand for imports from local businesses and a growing middle class.The deficit contributed to a near 20% depreciation in the local cedi currency in the first half of the year before the central bank intervened.But its efforts to shore up the cedi have hit Ghana's foreign exchange reserves, now at $5.2bn or 2.9 months of imports, just below the traditional three-month benchmark. Ghana also bucks a sub-Saharan African trend as Nigeria, Kenya, Mozambique and others have built up their reserves this year.Debt concernsWhile the smooth elections may have allowed investors "to cut the country a bit more slack", the worsening fiscal picture means they will not do so for long, said Giulia Pellegrini, JP Morgan strategist for sub-Saharan Africa.She expects the cedi to lose another 5 to 8% in the new year. "Investors will increasingly be monitoring the fiscal and current account situation," she said."People are taking in the full picture rather than simply saying 'it's stable, it's looking good, let's just go for it'. They're becoming more discerning if anything."The country's rapid accumulation of debt since debt relief is also a cause for concern, Pellegrini said, with external debt currently at $7.8bn, nearly double its 2008 levels. Finance Minister Duffuor said Ghana would issue a second Eurobond next year, which should help to lower borrowing costs. Ghana's 2017 bond is trading at a yield of 4.9%, much lower than the 21% investors demanded for a three-year domestic bond sold in October.Given high liquidity globally and the success of previous Eurobonds from African sovereigns, the issue should do well. But investors could make Ghana pay if it does not work on its budget. "Investors would still show quite a bit of interest but would want to be compensated for that," Pellegrini said.