REUTERS SUMMIT-Ghana central bank denies foreign investors fleeing bonds

(For other news from Reuters Africa Summit, click on http://www.reuters.com/summit/Africa14)

* Foreign investors still buying bonds, especially in secondary market

* Ghana could still meet budget deficit target of 8.5 percent of GDP

ACCRA, April 8 (Reuters) - Ghana is paying over-the-odds for its domestic debt but foreign investors are not fleeing the market even though the government has missed a string of fiscal targets, central bank Governor Henry Kofi Wampah told a Reuters Africa Summit.

The country has seen sustained gross domestic product (GDP) growth above 8 percent for five years making it a star African economy but some investors are rethinking their approach to the country because of macro economic instability.

In particular, authorities are wrestling to control a budget deficit that stood at 10.8 percent in 2013 and to close a balance of payments gap, as well as stem rising inflation and a slide in the cedi currency, which has lost 14.6 percent of its value against the dollar this year.

As a result, the government has delayed plans to issue a Eurobond this year, though it is going ahead with a non-deal roadshow in Washington.

At the same time, the yield on the benchmark 91-day bill rose to 23.9862 percent at its April 4 auction from 23.6876 percent at the previous sale, the highest level in around three years.

"Yes, we are having to pay a little high for our bonds but the good news is that foreign investors are not repatriating their investments out," Wampah told Reuters.

"Our observation is that some of them are rather coming back to buy the bonds - in our secondary market, of course - because they find the yield attractive," he said.

Wampah said the government could still meet its target of bringing down the deficit to 8.5 percent this year.

But the biggest concern for the economy is that fiscal instability will blunt GDP growth. In an acknowledgement of the problem, Wampah said 2014 growth would likely stand at around 6 percent.

That figure is lower than the 8 percent target set by Finance Minister Seth Terkper in November's annual budget but higher than the 4.8 percent projected by the International Monetary Fund.

"We can achieve this year's deficit target. Looking at revenues for the first two months the numbers have started picking up in all the various fields. Also, expenditure is well under control and a bit lower than projected for the period," he said.

"The first quarter has always been difficult because revenues don't come as quickly as expected so some of those expenditures that have come upfront will not recur subsequently," he said.

The policy focus for deficit reduction in 2014 remains on bringing down the public sector wage bill. The government has already taken radical action by slashing subsidies on utilities and fuel from 1.3 billion cedis to just 15 million, he said.

President John Mahama has reassured donors concerned about the missed fiscal targets. Wampah said he was confident they would not withhold budget support as they did in 2013 to the tune of $700 million, he said.

"The president met them and gave them the assurance that Ghana will not exceed its spending this time round. I think they are worried about the past two years and us not meeting the targets and they wanted assurances that the target would be met this time round," he said.

(Writing by Matthew Mpoke Bigg; Editing by Daniel Flynn/Jeremy Gaunt)