NAIROBI (AFP) - A Kenyan state-run lender has rejected a government plan to waive four billion shillings (60 million dollars, 38 million euros) owed by farmers, saying it would dent its credibility.

The government plans to present a bill in parliament to compel the Agricultural Finance Corporation (AFC) to write off the debt to cushion farmers against unsteady prices due to over-production or unfavourable weather.

"To have the AFC write off loans would send the wrong signal; it perpetuates (the) perception that AFC is here as a charitable organisation," its chief Omurembe Iyadi told a news conference late Wednesday.

"It is time that the government changed its approach so that AFC is perceived correctly as a financial institution."

Iyadi suggested that the government should provide subsidies for farmers as they re-pay the loans, some of which have dragged for decades.

In June, the government pleaded for 72 billion shillings (1.1 billion dollars) in emergency funding to counter a food crisis.

Earlier the same month, three UN agencies said they would grant Kenya 7.6 billion shillings to help farmers and boost the school feeding programme.

Home to 35 million people, Kenya is currently in the midst of a food shortage worsened by months of post-election violence that killed 1,500 people and displaced hundreds of thousands.

Steep global food and fuel prices have worsened overall inflation in the east African nation, pushing it to 31.5 percent in May, the highest since the mid-1990s when the economy nearly collapsed, before it reduced to 29.3 in June.

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