DILEMA FOR DONORS OVER KENYA AID !

By Adam Mynott - BBC News, Nairobi

Kenya's biggest donors have warned the country explicitly or implicitly that aid to the country may be cut or ended unless there is a satisfactory outcome to the post-election crisis that has killed around 700 people and driven 250,000 from their homes.

The US, the biggest donor, and the UK, the second biggest donor, have both said that under the current circumstances, where there is doubt over the outcome of the presidential election on 27 December 2007, that it is not "business as usual" with the Kenyan government.

Britain has given $2m (£1m) to help with the humanitarian crisis resulting from the violence which followed the election, but both countries are said to be watching and waiting before pressing ahead with their full aid programmes.

The other big donor, the European Union, is already under pressure to cut its funding; the European Parliament has voted for a freeze on donor aid to Kenya. It is not their decision - that lies with the European Commission - but the threat is real and it is hanging in the air.

When the European Development Commissioner, Louis Michel, was in Nairobi at the weekend I understand he made it clear to President Mwai Kibaki that unless moves were made to find a negotiated settlement to the crisis, then donor aid from the EU would be cut. Kenya is not one of Africa's "most indebted nations" but it is a very poor country.

The UN estimates that 250,000 Kenyans have been displaced Around 60% of Kenya's population of 37m lives on less than a dollar a day and although Kenya's GDP has been growing for the past three or four years, many of the other economic and social indicators have dropped.

Kenya slipped five places in the 2005 Human Development Report, life expectancy has fallen (WHO) and Kenya is seen as one of the 20 most corrupt countries in the world (Transparency International). The impression is given in some quarters, perhaps encouraged by the Kenyan government, that it does not need international aid and that it can stand on its own feet.

This is not the case. The US gives $600-700m dollars in aid. This is all targeted spending, none of it is given directly to the government as budget support. Much of this comes through the US PEPFAR fund and goes towards health care, education, HIV/Aids prevention etc. In addition another $300-400m is given through private funding or other means.

So the total aid injection from the US amounts to about $1bn. A spokesman at the US Embassy in Nairobi said that on top of this, investment, tourist spending and remissions by Kenyans living in the US amount to approximately another $1bn going into the Kenyan economy.

The UK was committed to giving Kenya $100 million in the coming year and since 2001 the Department For International Development has spent over $330m in Kenya. Like the US, none of that money goes directly to the government in budget support but is aimed at specific projects or areas of spending. Donors hope their pressure will end the post-election violence. A large chunk of the UK aid goes to education and the former Kenyan government under President Kibaki was able to fulfil its election promise of free primary education in part because of UK funding.

One of the big election promises made by Mr Kibaki's Party of National Unity (PNU) at this election was to move to free secondary education. Realistically, this cannot be achieved without substantial help from donors. The EU provided $425m between 2002 and 2007 to Kenya and has promised a further $560m between 2008 and 2013. A third of this money does go straight to the Kenyan treasury as budget support. Euro MPs want this to be cancelled.

The dilemma for donors is that cuts in aid inevitably first hit those they're intended to help: the poor and sick and disadvantaged in Kenya; and so often in the past, threats of donor aid reduction have ended up being just that, threats.
BBC NEWS REPORT.