NAIROBI, Dec 19 (Reuters) - The Kenyan government's domestic borrowing to finance its 2007/08 fiscal budget is expected to fall below the planned 33.9 billion shillings ($541.1 million), an advisory body to the Central Bank of Kenya said.

In a statement issued late on Tuesday, the Monetary Policy Advisory Committee (MPAC) also commended Treasury's "fiscal restraint" in a year when presidential and parliamentary elections are being held.

"The committee...observed that government borrowing from the domestic market remained below what had been planned," MPAC said in a statement signed by Central Bank Governor Njuguna Ndung'u.

"The committee...noted that government borrowing was likely to be less than the 33.9 billion that was planned for the fiscal year...given that the projected receipts from privatisation are likely to be higher than initially anticipated," it added.

MPAC noted that the government's sale of a 51 percent share in telecommunications firm Telkom Kenya was expected to generate more than 20 billion shillings above the anticipated receipts.

A consortium led by France Telecom <FTE.PA> won the bid by offering to pay $390 million for the Telkom Kenya stake, and is expected to take control of the company later in December.

The government is also in the process of preparing for an initial public offering of the country's largest mobile phone service provider, Safaricom, in which it will offload a 25 percent stake at the Nairobi Stock Exchange.

Commercial banks have in the past worried that if government borrowing in domestic markets exceeded the amount proposed in the budget, it would edge out private borrowers and push interest rates up.

The benchmark 91-day treasury bill rate stands at 6.839 percent at the last auction held on Dec.13, compared with 6.865 percent previously.

Kenya holds elections on Dec. 27. (Reporting by George Obulutsa; editing by Tony Austin) (([email protected] +254 20 2224 717; Reuters Messaging: [email protected])) ($1=62.65 Kenyan Shilling)

Keywords: KENYA DEBT/