Lady Chalker told a press conference in Nairobi last Friday that Britain would not grant Kenya further aid unless there was evidence of progress on economic and political reforms and human rights.
"It is dismaying to note that Baroness Chalker held the press conference before meeting her host, President Daniel arap Moi," a statement on Kenyan radio said.
"The Kenya government views this behaviour as impolite and contemptuous and likely to hurt the relations between the two countries. If she had already made up her mind about Kenya, then meeting President Moi after her press conference was irrelevant. She should have made her declaration from London, instead of travelling this far to ridicule Kenyans in their own country, which attained independence from Britain in 1963."
President Moi is believed to have been "furious" when he heard news of Lady Chalker's statement. He is said to have appeared at State House in Nairobi clutching a news agency report in one hand and his ceremonial stick in the other, demanding an explanation of her announcement. However, an "explanation" was not forthcoming until Monday, when Britain's High Commissioner to Kenya, Simon Hemans, called another press conference "to end the speculation and media over-reaction which have characterised the last few days since Lady Chalker was misquoted".
Mr Hemans said: "British aid is continuing", and explained that project aid devoted to projects in the field would carry on. But he added that further programme aid - block grants to the government - was conditional on "forward momentum" on reform of the state sector and the treatment of opposition politicians and the press.
Britain's average annual aid contribution to Kenya is about pounds 31m, divided roughly equally into programme and project aid.