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The US said late last week it was suspending all funding towards Kenya's fight against corruption, following the resignation of Nairobi's top anti-corruption official.
John Githongo resigned last week, dealing a potentially severe blow to government efforts to convince donors that it is serious about fighting corruption.
The state-run Kenya Broadcasting Corporation said on its website that an unsigned statement from Githongo's office said he could no longer work with the government.
President Mwai Kibaki appointed Githongo as his permanent secretary for governance and ethics in January 2003, creating the new office shortly after he led an opposition alliance to a historic election victory.
Kibaki had pledged a zero-tolerance attitude to the systemic graft that had crippled east Africa's largest economy, and Githongo's appointment was lauded by donors.
He was previously head of the Kenyan chapter of Transparency International and was widely respected within Kenya's civil society and the global community.
But the administration has been criticised by donors and Kenyans for failing to take action against high-level graft, amid reports of suspect deals involving government officials.
The US said it would suspend all funding to Kenyan anti-corruption efforts after Githongo's resignation. William Bellamy, the US ambassador to Nairobi, told a business group that about $2.5bn would be withheld for 2005 and 2006.
"We are eager to work with Kenya to improve governance and we are in position to be generous in this regard," Bellamy said.
"But we cannot be helpful when all the evidence suggests that government isn't serious or, worse, that government is the source of the problem."
His remarks were made just days after Sir Edward Clay, his British counterpart, prompted a furore by lambasting the government for tolerating graft.
He said he had given Kibaki a dossier of 20 dubious procurement tenders meriting investigation.
Clay, without naming names, accused current senior officials of conspiring with foreign associates of the previous Kenyan governments to engage in "massive looting" of public coffers.
One diplomat said Githongo's resignation "blows a big hole in the government's credibility".
"It's partly historical because of the role he played before the government came into power," the diplomat said.
"He's hugely respected his departure will leave a big hole."
Alfred Mutua, a government spokesman, said Kibaki's administration was still committed to fighting graft.
"The fight against corruption is a difficult fight and it is a fight that needs people who are able to hang on, because when the going gets tough, people should not throw up their hands and give up," he said.
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FT Syndication Service
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