Donors move to freeze aid to Kenya

Major donors have decided to freeze funding until the Kenya’s post-election crisis can be resolved.

From the Nation in Nairobi.

The aid freeze letter to the ministries said: “In cases where your department/agency has submitted a basket funded procurement request to the governance reform programme the approval of these requests will be put on hold until further notice.

“In cases where procurement requests from your department/agency have already been approved by the governance reform programme, the Financial Management Agent will not be in a position to make a financial commitment in support of the specific activity.

“You are therefore advised not to proceed with these procurements until further notice.”

Foreign Aid donations only make up six percent of Kenya’s budget, reports the Telegraph in London.

Jendayi Frazer, the American assistant secretary of state for Africa, said the U.S. government is also reviewing its aid program, the paper reported.

In an analysis piece for the East African, from Nairobi, editor Jaindi Kisero claims the freeze in funds could destabilize the government’s financial standing.

With more than 40 per cent of the country's Ksh150 billion ($2.3 billion) development budget funded by donor flows, the freeze is likely to destabilise the government's finances badly - with serious macroeconomic consequences.

As it is, the aid freeze will put at risk large capital expenditure outlays on the roads, education and health sectors, which are heavily financed by the country's European bilateral donors, especially grants.

Although most of what European creditors give Kenya is designated as project aid, the truth of the matter is that the government accesses most of this money in the form of reimbursables - cash refunded to the government by donors to replace what the government has already spent.

Thus, if the aid freeze is effected, one of the biggest sufferers will be the Ministry of Education -one of the largest projects, the Kenya Education Support Programme, is heavily funded by donors, with part of the money going directly to suppliers - what is referred to in jargon as appropriations-in-aid - and the remainder coming in as reimbursed revenues.