The World Bank and African Development Bank (AfDB), acting to ”raise an alarm” over the turmoil in Kenya, said on Tuesday they may have to adjust lending programmes there if unrest persists following a disputed poll.
”We wish to continue working with the people of Kenya … but it is difficult to do so effectively in an environment of instability,” they said in a joint statement. ”Accordingly … we will make necessary adjustments as the situation evolves.”
”Accordingly we will continue to monitor developments closely, keep our programmes under review and make necessary adjustments as the situation evolves.”
In a speech to diplomats in Tunisia, AfDB President Donald Kaberuka said of the situation in Kenya: ”Without being a political organisation, which we are not … we consider it important to raise an alarm that this could be damaging, and we decided to do it together with the World Bank.”
Kaberuka added that ”internal turbulence” like that in East Africa posed more of a threat to the continent than the subprime credit crisis.
”We have been very concerned at the impact on ordinary people, especially poor people [in Kenya]. This is a country that was making progress, growing at 7% annum, on its way to middle income country status,” he said.
Kaberuka said it was important that African countries took ”ownership” of the task of ensuring political stability so that the development effort did not ”go forward three steps and march backwards four steps”.
”Again, talking about the events in East Africa, I saw on the news people rioting and pulling out the railway. Here we are, going to finance infrastructure, but it is important that there is stability in our countries and we make progress and don’t pull out the railways and damage the infrastructure.”
”So I go back to the issues of our own ownership of the issues to do with stability, stability which brings confidence, which brings investment, which leads to higher growth.”
At least 650 Kenyans have died in violence since President Mwai Kibaki was sworn in following a vote the opposition says was rigged. The chaos has cost Kenya’s economy hundreds of millions of dollars and blocked vital trade routes to its neighbours.
”The current situation could drive two million Kenyans into poverty, reversing the gains made over the last few years,” the joint statement said. ”Business confidence is being undermined.”
Though Kenya does not need or get the kind of donor funding that many of its poorer neighbours receive, the World Bank says on its website that it had a total lending commitment to Kenya of $919-million as of September 2007.
A quarter is for big infrastructure. Much of the rest of the money it shells out goes to social projects such as education, HIV/Aids, water pumps for dry rural areas and flood mitigation for wet ones.
Former UN secretary general Kofi Annan was due to arrive in Kenya on Tuesday to try and mediate an end to the crisis.
The European Union has threatened to cut aid unless Kibaki and opposition leader Raila Odinga sit down and hold talks.
The United States and Britain warned they cannot conduct ”business as usual” in Kenya as things stand.
But analysts say the West has very little leverage on Kenya, which funds all but 5% of its budget from its own resources.
”The impact on other countries in Eastern Africa from the fallout in Kenya, in particular the disruption of transit routes, is high and will increase as the problems persist,” the two lending institutions said.
The Kenyan shilling approached an 11-month low versus the dollar on Tuesday, weighed by concerns over the continuing crisis. But the equity markets seem largely to have shrugged off negative sentiment, traders say. – Reuters