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Saturday, September 26, 2009

World Bank freezes US$ 166 million funding for Kenyan

Nairobi, Kenya - The World Bank (WB) said Thursday it had suspended funding for two key projects, worth US$ 166 million, covering education, water and flood management in Kenya's western region, pending investigations into fraud and corruption, the bank said Thursday.

The Bank said the projects, including the Kenya Education Sector Support Programme (KESSP) and the Western Kenya Community-Driven Development and Flood Mitigati on Project (WKCDD), were suspended over corruption involving Bank staff and Kenyan officials.

'While we are disappointed to learn that project staff may be engaged in corruption in these projects, we are encouraged by the government's immediate respon se,' said Johannes Zutt, World Bank Country Director for Kenya.

'We are determined to have the problems fixed as quickly as possible, so that these projects can resume their important activities and bring to Kenyans the benefits that they were intended to bring,' he said.

The World Bank's support to the KESSP consists of an US$ 80 million credit that was approved in September 2006 and has disbursed about US$ 57 million to date.

The Bank's US$ 86 million WKCDD project was approved in March 2007 and has disbursed about US$ 20 million to date.

'The decision follows an announcement on Wednesday by the Government of Kenya that it had frozen the accounts of the two projects due to what an official press statement said 'appears to be fraud and corruption,' the Bank said in a stat ement Thursday.

Kenyan officials said full investigation into all allegations was underway. The government has also initiated a process of suspending about 50 project staff for alleged involvement in fraud and corruption.

Kenya Anti-Corruption Commission (KACC) is carrying out further investigations into the allegations.

The Bank praised the government for the action, saying the decision reiterated their pledge to use public resources entrusted to them 'efficiently and effectively for their intended purposes'.

The World Bank will also be undertaking its own investigation, which if they confirm fraud and corruption" lead to sanctions such as the debarment of companies and individuals engaged in wrongdoing.

The World Bank's investigation would complement Kenya's efforts to strengthen the fight against corruption and address governance challenges in development projects in the country.

Kenya has undertaken important financial management reforms over the past few years that have resulted in a much stronger audit capacity for its development programmes, the Bank noted.

The Kenyan Internal Audit Department (IAD) initiated its first-ever fiduciary review of all World Bank-financed projects in Kenya earlier this year, with support from the Bank.

Out of 25 projects and trust funds, five projects were assessed as having material concerns and selected for forensic review.

'Serious incidents of fraud and corruption were found in two projects,' the Bank said.

Kenya and the World Bank have been working together closely to tighten oversight of the entire Bank-financed portfolio in Kenya, which includes 16 national and five regional projects.

Nairobi - 24/09/2009


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