Kenya to borrow heavily to support economy: analysts

By Helen Nyambura-Mwaura

NAIROBI (Reuters) - Kenya must borrow heavily in the coming months to keep its economy afloat and should use the money for investment not public sector wages, analysts said.

In his June budget, Finance Minister Uhuru Kenyatta raised development spending by 82.6 percent to 258.9 billion shillings and said he would borrow 109.5 billion from domestic markets.

"The shift by the government towards greater borrowing is out of necessity rather than choice," said Simon Freemantle, economist at CFC Stanbic Bank.

Once the global economy stabilises and Kenyan companies operate at optimal levels again, the government is likely to reduce reliance on external funds, he said.

But for now, Kenya's economy is technically in recession.

Growth figures released on Wednesday showed that on a seasonally adjusted basis, Kenya's economy contracted in the fourth quarter of 2008 and the first three months of 2009 -- the first time that has happened since 2002.

Growth in 2008 slumped to 1.7 percent from 7.1 in 2007.

Another analyst said borrowing was appropriate as long as it was within the next 18 months, stuck within government plans