GENEVA, April 18 (Reuters) - A cholera outbreak in Kenya has killed 67 people so far this year, while a fungus has wiped out up to 20 percent of the country's annual rice production, United Nations agencies said on Friday.

Nearly 1,300 cases of cholera, a virulent water-borne disease, have been reported in the east African country since January, the World Health Organisation (WHO) said.

More than half are in western Nyanza province along Lake Victoria which has also had the most deaths, while an outbreak in the east near the border with Somalia has abated, it said.

"The number of new cases each week is dropping, which is rather reassuring," WHO's global cholera coordinator Claire-Lise Chaignat told Reuters.

Health ministry and WHO officials have supplied chlorine to treat water supplies and are assessing hospital needs. Cholera, transmitted mainly through contaminated water and food, begins with acute watery diarrhoea that in severe cases can cause death by dehydration and kidney failure within hours.

"This comes amid a humanitarian situation which remains very worrying in Kenya," Elisabeth Byrs, spokeswoman of the U.N. Office for Humanitarian Affairs (OCHA), told a news briefing.

The United Nations appealed last week for a further $150 million to help 500,000 Kenyans left destitute by post-electoral violence. This brought its funding appeal to nearly $200 million for Kenya in 2008.

At least 1,200 people were killed and hundreds of thousands left homeless after President Mwai Kibaki's disputed re-election in December. A power-sharing cabinet was sworn in on Thursday.

A fungus has destroyed 5,600 hectares of rice in Central Province, which produces the bulk of Kenya's rice, OCHA said.

This is equivalent to 10 to 20 percent of annual output and means Kenya will have to increase imports even though global rice prices have soared by 75 percent in the past two months, it said.

"This risks worsening Kenya's food insecurity and makes import of additional quantities even more expensive," Byrs said. "It is a fresh blow for this country, where the situation remains tense despite the announcement of a coalition cabinet."

Kenya's agriculture ministry has ordered fertilisers to be sold at less than half the current market rate to help farmers struggling with price rises, according to OCHA. (Reporting by Stephanie Nebehay; Editing by Tim Pearce)

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