  We discuss In\"on\"u-Wigner contractions of affine Kac-Moody algebras. We
show that the Sugawara construction for the contracted affine algebra exists
only for a fixed value of the level $k$, which is determined in terms of the
dimension of the uncontracted part of the starting Lie algebra, and the
quadratic Casimir in the adjoint representation. Further, we discuss
contractions of $G/H$ coset spaces, and obtain an affine {\it translation}
algebra, which yields a Virasoro algebra (via a GKO construction) with a
central charge given by $dim(G/H)$.
