Govt cuts '08 growth estimates after weak Q3

• Cuts 2008 GDP growth estimate to 3.5-4.0 percent
• Sees 5.4 percent growth in 08/09 financial year
• $227m bonds to be issued locally in two months

A final decision on how to raise the $500 million would be taken later this year. "We are looking for options, like to what extent we can borrow locally," said Mwau.

"We will make a final decision when we are doing the revised (budget) estimates in March ... the issue will be weighing between which areas to cut back and how much to borrow to make sure we don't destabilise the economy."

Mwau said concerns about harvests might call for more food imports, thus putting pressure on the balance of payments. Kenya is importing five million bags of maize and plans to scrap duty on wheat imports soon to cushion consumers from high prices.

"Food security doesn't mean you should be able to produce everything. The pressure could be on something else like balance of payments," he said.

Kenya's balance of payments surplus fell 84 percent to $74 million in the year to October, although analysts expect the surplus to improve thanks to the fall in oil prices.

Mwau said he expected foreign investments in the Information Communications Technology (ICT) sector to check a deterioration in the balance of payments, once a submarine cable linking the nation to the Middle East is completed in June.

"We expect a lot of interest in ICT," he said.