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Ghana will open its two-year domestic bond auctions to foreign investors this month, a senior central bank official said on Tuesday, in a renewed effort to attract more offshore funds and reduce its borrowing costs.

The West African commodities exporter, a former darling of frontier market investors, is saddled with high public debt due in part to its reliance on costly domestic borrowing, a phenomenon that has raised concerns that it could suffer a debt crisis.

Presently, offshore investors are allowed to buy only medium- and long-term government securities that have maturities of three years and above.

"We now have modalities in place to allow foreign investors to participate in our two-year auctions in line with the government's new debt management policy," the official told Reuters.

"The process should kick in later this month and it is intended to draw in more offshore funds and boost liquidity flows," said the senior official, who declined to be named.

The central bank is expected to announce the move officially next week.

The decision could support the cedi currency, which fell 22 percent in the first half of this year and has only begun to recover on increased central bank interbank dollar sales, analysts say.

The official said Ghana expects to receive up to $4 billion in donor funds and loans by December and this would significantly help to boost the country's reserves in support of the cedi.

"We're expecting more inflows and we'll continue to support the market ... the rates are also responding and it must be sustained," he added.

The government also plans to introduce the concept of Book Runners to arrange domestic bond auctions occasionally to rally local participation with the aim of gradually driving down yields, a source close to the discussions told Reuters on Tuesday.

Ghana, which exports cocoa, oil and gold, has begun a three-year aid program with the International Monetary Fund to support its economy, dogged by slowing growth, a stubbornly high budget deficit and widening public debt.

Its benchmark 91-day treasury bill attracted a yield of 25.1801 percent at the last sale on Friday, compared to 8.165 percent for a similar paper in Kenya.