(adds protest)
By Andrew Cawthorne and Hereward Holland
NAIROBI, July 1 (Reuters) - Kenya's prime minister summoned cabinet colleagues on Tuesday to look at the secretive sale of a luxury hotel at what critics say was a knockdown price while protesters demanded the finance minister be fired over the deal.
The Grand Regency deal has stoked national outrage and fuelled tensions in an already fragile coalition government set up in April to end a post-election crisis.
"Kimunya must go!" chanted scores of marching demonstrators, referring to Finance Minister Amos Kimunya.
About 10 legislators were among the 100 or so protesters who marched from the hotel in what organisers said was the first in a series of planned demonstrations in Nairobi.
The Regency deal, involving Libyan investors, has added to suspicions of continued large-scale corruption after a series of scandals in east Africa's biggest economy, which foreign businesses routinely cite as a deterrent to investment.
The saga has pitted mainly ministers from Odinga's Orange Democratic Movement against Kimunya, a loyal ally of President Mwai Kibaki. Kimunya has been finance minister for most of Kibaki's rule since 2003, a time of strong growth.
Reversing prior remarks the government-owned hotel had not been sold, Kimunya said last week it had gone for 2.9 billion shillings ($45 million) after an offer "too sweet" to refuse.
That price, less than the 4 billion shillings of a 1994 sale price for the hotel which analysts value now at between 4.5 and 6 billion, provoked outrage around Kenya, including from some of Kimunya's cabinet colleagues and anti-graft watchdogs.
The minister says the deal was above-board and fetched the best possible price for the nation. His defenders say critics are mounting a witch-hunt before examining details of the deal.
Late on Monday, cabinet colleague and Lands Minister James Orengo produced transaction documents that he said showed the Regency had in fact been sold for just 1.85 billion shillings.
Orengo said Central Bank governor Njuguna Ndung'u had signed the agreement, and the hotel had gone to a company known as "Libyan African Pan African Investment Company Kenya Limited" with both Libyan and Kenyan directors.
"READ THE TEA-LEAVES"
Local economist Robert Shaw urged Kimunya to resign. "And if Prof. Njuguna Ndung'u is reading the tea-leaves, he would be well advised to call it a day too," he added in a newspaper column.
Justice Minister Martha Karua, despite being another stalwart of Kibaki, has also criticised the finance minister.
Kibaki and Odinga were at bitter loggerheads for the first two months of 2008, after Odinga accused Kibaki of stealing the December presidential election through fraud.
But via international mediation, they buried their differences to form a coalition government that has brought peace back to Kenya. Odinga called a meeting of cabinet's finance committee on Tuesday to discuss the Regency affair.
The controversy has weighed slightly on the local currency, the shilling, which weakened to 65.00/10 to the dollar on Monday from 64.70/80 on Friday. "There is a bit of negative sentiment around the political front," analyst Noah Meely said.
The Regency had been owned by a Kenyan tycoon accused of being the architect of the so-called Goldenberg scandal that nearly sunk Kenya's economy in the 1990s.
Kamlesh Pattni, who has been tried but never convicted despite multiple probes into the siphoning of some $1 billion of public funds over bogus diamond and gold exports, handed the five-star, multi-storey hotel to the bank earlier this year.
Local media said that won him immunity from prosecution. (Additional reporting by George Obulutsa and Duncan Miriri; Editing by Richard Balmforth) (For full Reuters Africa coverage and to have your say on the top issues, visit: http://africa.reuters.com/)
(nairobi.newsroom@reuters.com; +254 20 2224717)
