Why World Bank funding freeze on Uganda is a mistake

Activists say it is a counterproductive move

Kampala, Uganda | RONALD MUSOKE | In a surprising twist, some members of the gay community in Uganda have told The Independent they are not pleased by the recent decision of the World Bank to cut funding to new projects in Uganda because of the recently enacted Anti-homosexuality law.

The World Bank said in a statement published on Aug.8 that it was halting funding to Uganda because of its recent enactment of the Anti-Homosexuality Act, 2023.

But Frank Mugisha, the former Executive Director of Sexual Minorities Uganda, told The Independent on Aug.10 that the gay community in Uganda has never pushed for halting of funding to Uganda because it is a counterproductive move.

“Aid cuts would create more backlash for the gay community in the country because Ugandans would then blame the community,” Dr. Mugisha said. “In fact, our position has always been that aid cuts would affect all Ugandans including the gay community itself. Logically it does not make sense; what we have always preferred are targeted sanctions.”

Mugisha, was one of the conveners of Uganda’s Convening for Equality, a coalition of civil societies opposed to the law, who pushed the World Bank to take action on Uganda in June this year.

“We, as activists, are challenging the many devastating impacts of this law in the Constitutional Court, but the World Bank is a key stakeholder in Uganda’s ability to build shared economic prosperity for all. It too must actively press the government to change course by taking action,” said Mugisha previously.

He, however, now says the gay community has nothing to do with the World Bank decision. “This is out of our hands,” he said, “Ugandans should know that these organisations and Western countries have their own tax-paying constituents back home who they are answerable to.”

“If anyone wants to blame anyone for the current financial squeeze the government finds itself in, that blame should go straight to the anti-gay groups in Parliament who passed this law without any empirical evidence,” Mugisha told The Independent, “The law was passed based on conspiracy theories because it never had any empirical data to back the arguments for its enactment.”

In cutting of funding, the World Bank said in a statement that “Uganda’s Anti-Homosexuality Act fundamentally contradicts the institution’s values.

“We believe our vision to eradicate poverty on a livable planet can only succeed if it includes everyone irrespective of race, gender, or sexuality,” the statement reads in part. “This law undermines those efforts. Inclusion and non-discrimination sit at the heart of our work around the world.”

Interestingly, the Bank said in its statement that it has a longstanding and productive relationship with Uganda; and remains committed to helping all Ugandans without exception escape poverty, access vital services, and improve their lives. It is, however, not clear how cutting off project funds improves the lives of Ugandans.

Available information indicates that Ajay Banga, the new World Bank President who had just taken office when President Museveni signed the law on May 26, has been under pressure to respond to the Ugandan law.

On June 15, close to 170 civil society groups, in a letter, urged Banga to take “specific concrete and timely actions” in response to the Uganda anti-LGBTQ+ law, including suspending future lending.

The groups are from around the world including Africa, Asia, the Middle East, Europe, and North and South America.

“With the development of a new Environmental and Social Framework several years ago, the Bank claimed to value inclusion and non-discrimination. Now it faces a test of that commitment,” said Rachel Burton, the Social Inclusion Director of the Bank Information Centre.

“In the face of Uganda’s blatantly discriminatory law, President Banga should ensure the World Bank takes decisive steps, including stopping payments on current loans to Uganda and suspending future lending until the law is struck down by the constitutional court.”

The civil society groups said World Bank action is critical now to send a strong message to other countries currently considering similarly discriminatory legislation that the World Bank will live up to its own values and rhetoric and comply with its own policies regarding the importance of inclusivity as a driver of economic development.

Ajay Banga responded on Aug.8 throwing the Uganda government’s financial planning into uncertainty.

The focus on the on-going petition against the law in the Constitutional Court by both Mugisha and the Social Inclusion Director of the World Bank Information Centre, shows that the recent statement by the Bank is expected to force President Museveni’s government to surrender and reverse the law. If that is the case, then the move is a mistake.

President Museveni reacts

The World Bank decision has instead fired up anti-homosexuality and anti-World Bank sentiments among Ugandans, with senior government officials led by President Yoweri Museveni taking a tough stance.

“I want to inform everybody; starting with Ugandans, that Uganda will develop with or without loans,” President Museveni said in a statement posted on Aug.9 via the X social media platform.

He added: “It is, therefore, unfortunate that the World Bank and other actors dare to want to coerce us into abandoning our faith, culture, principles and sovereignty, using money. They really underestimate all Africans.”

Museveni said if there is absolute need for borrowing, Uganda will turn to a number of non- Bretton Woods sources. He also pointed to the country’s oil resources that the government expects to commercialize in the next 30 months.

“Moreover, our first oil will start flowing by 2025. That will be an additional source of State revenues and also financial flow into the economy,” he said.

Museveni said with “discipline, patriotism and combating corruption, we shall thrive because our agriculture is there, our industries are growing and our services sector is expanding.”

Uganda’s State Minister for Foreign Affairs Henry Okello Oryem also told The East African that the World Bank decision smirked of hypocrisy. Oryem accused the West of being quick to lecture “vulnerable countries” about democracy; only to turn around and punish them when they do what does not suit the interests of Western powers and allied institutions.

“Stop the hypocrisy. The law was passed by the Uganda Parliament; these are representatives of the people. That’s democracy.”

Oryem said the West does not treat all countries the same. He said the aid cuts and freeze on lending targeting Uganda are unfair, unjust and uncalled for.

“Since the passing of this law, we have not had an LGBTQ+ person here persecuted, but there are countries in the Middle East that hang homosexuals. Why are they not talking about these countries? This contradiction shows injustice,” he said.

But Godber Tumushabe, the Associate Director of the Great Lakes Institute for Strategic Studies, a Kampala-based public policy think tank told The Independent on Aug.10 that, “Uganda as a country cannot do without foreign lending given the fact that we have a very extravagant government.”

Tumushabe thinks President Museveni is just bluffing when he says Uganda can develop with or without foreign loans. “President Museveni is writing from the comfort of State House and when I see Ugandans cheering him on, I laugh because neither the World Bank nor Museveni will feel the impact of this; it is you and me the ordinary Ugandans who will feel the consequences,” he told The Independent.

“Museveni is talking about Uganda producing oil in 2025 and fighting corruption as the possible remedies to weaning Uganda off foreign loans but he does not have the capacity to fight corruption,” Tumushabe said.

Room for negotiation

In its terse 197-word statement, the World Bank appears to have left room for negotiation.

It said “no new public financing to Uganda will be presented to our Board of Executive Directors until the efficacy of the additional measures has been tested.”

And it added: “Third-party monitoring and grievance redress mechanisms will significantly increase, allowing us to take corrective action as necessary.”

The Bank noted that immediately the law was enacted, the Washington DC-based institution sent a team to Uganda to review its portfolio in the context of the new legislation.

“That review determined additional measures are necessary to ensure projects are implemented in alignment with our environmental and social standards. Our goal is to protect sexual and gender minorities from discrimination and exclusion in the projects we finance. These measures are currently under discussion with the authorities.”

President Museveni on May 26 assented to the Anti-homosexuality ACT, 2023 after the Uganda Parliament passed the Anti-Homosexuality Bill in March.

Homosexuality was already criminalized in Uganda law as “an act against the law of nature.” But the new law went further to prohibit any form of same sex relationships and their promotion or recognition and also introduced new crimes and sentences such as aggravated homosexuality which attracts a life sentence.

Activists said World Bank staff and anyone working on World-Bank funded projects could be caught by these provisions of the law, among others. The law already is driving marginalized people away from needed services, the activists said.

They said state sponsored discrimination and violence against real or perceived LGBTIQ+ people in all areas of life  from employment, to housing, to health care and education – is devastating to any possibility of inclusive economic development in Uganda.

What is at stake?

The World Bank decision came just six weeks into Uganda’s new financial year (2023/2024). However, a source at the Ministry of Finance told The Independent that the World Bank move affects only projects that are being negotiated and have not been approved. The source said projects worth about US$6.7 billion are at stake.

A World Bank official in Washington also told Reuters that the existing portfolio will continue to disburse funds, even as new lending is put on hold. In addition, the World Bank official said private sector projects backed by the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) will also proceed only on selective basis.

“But it’s new projects not in the budget, it’s not a big deal,” said the source.

So why have leaders at the Ministry of Finance been telling Parliament that the 2023/24 budget might have to be adjusted?

“I don’t know,” said the source who is a Finance ministry technocrat, “You ask them.”

Henry Musasizi, the state minister for Finance, Planning and Economic Development (General Duties) told MPs in Parliament on Aug.10 that government is engaging with the World Bank on its decision to cut financing of projects in Uganda.

“We are negotiating with the World Bank but should we fail to agree, then we shall make some decisions on the budget which we shall bring to the attention of Parliament for approval,” he said.

Musasizi told the legislators that the decision by the World Bank will have dire consequences on the operations of government. “We are still gathering ideas about what to do in line with adjusting the budget but this will require your approval,” said Musasizi.

Earlier, on June 15, Matia Kasaija, the Minister of Finance, Planning and Economic Development unveiled a Shs52 trillion budget in which he noted that it would be financed mainly by domestic revenues, budget support (loans and grants), domestic borrowing, interest payments, local government revenue and project support.

It is not clear how much loans the government had targeted to get from the World Bank in this financial year but, last year, the institution disbursed US$ 5.4 billion in International Development Association (IDA) financing to Uganda. Some of the funds went into health and education projects.

On its website, the World Bank says it has about 30 active projects while 13 are in the pipeline, probably waiting for approval. Among ongoing projects include the Uganda Support to Municipal Infrastructure Development (USMID) programme targeting infrastructure development in several municipalities around the country. It also has the Greater Kampala Metropolitan Area Urban Development Programme targeting infrastructure development around Kampala, Wakiso and Mukono.

There are also electricity grid expansion and health and education and refugee-host-community development programmes. Those that are still waiting for clearance include; agriculture development, land administration, climate change resilience and the Kampala urban mobility projects.

‘World Bank has no values except money’

The World Bank decision continues to attract debate on social media platforms with some Ugandans saying the World Bank has never cared about values or human rights in Uganda or any other developing country in Africa, Asia or Latin America.

“It’s disturbing how institutions like these ones give priority to only gay rights and ignore all the other gross human rights violations including mass murder, torture, detention without charge and undermining democracy by rigging elections. Dear@WorldBank, all human rights are human rights,” Robert Ssentamu Kyagulanyi (Bobi Wine), the President of the National Unity Platform, Uganda’s leading opposition political party tweeted on Aug.9 in direct reply to the World Bank statement.

Oweyegha Afunadula, a retired professor writing on his Facebook page asks what exactly the World Bank values are, besides money. He says the history of the World Bank funding of projects in Africa shows that it has habitually only valued the money economy.

“In pursuit of money, it has violated all known values including; cultural values, ethical values, moral values, ecological and environmental values,” Prof. Afunadula said on Aug.11.

“On the whole, the World Bank loans have been just about imposing its development choices meant to proliferate the money economy. Even when a country does not need loans, they have been imposed by the World Bank.”

“When this combines with the carelessness and corruption of our politicians and bureaucrats in all institutions of government, it is clear that even if we continued to get loans from the World Bank and IMF for the next 100 years, we shall never develop our country and not hand over the gains of development to the future generations of Uganda.”

“I have for decades failed to see the other values of the World Bank except the value of money. Reference to things like social and environmental values in more recent times is intended to convince humanity to believe that the Washington technocrats care about humanity. Never. It’s money they have cared about all along. It’s their culture and value.”

Prof. Afunadula’s sentiments are echoed by Julius Kapwepwe, the coordinator at the East African Budget Network, a civil society platform that influences prudent fiscal policy, monetary policy and budget accountability within the East African Community.

He told The Independent that for a long time, the World Bank has been as colonial instrument; especially in South America and Africa. He says through its exploitative and debt trap architecture, the World Bank has never been forthright in its dealings with countries like Uganda.

Kapwepwe told The Independent that the World Bank’s halting of funding to Uganda is “good news” for Ugandans. “We shall suffer in the short to medium term but in the long run we shall be alright; it’s time to look inward, clean-up and be more prudent when it comes to revenue mobilization (both domestically and externally).”

Going forward, Kapwepwe says one of the ways the government could go about the financial squeeze it finds itself in is to become frugal by cutting off non-essential recurrent expenditure as well as prevail over the run-away corruption.

“It is time to aggressively diversify the markets for our products. It’s also a good opportunity for the government to deliver its commitments to the rationalization of the institutions and cut out unnecessary expenditure. This is the time to look inward.”

“I pray that the World Bank leaves for good because it will make us think more deeply about our development goals,” he told The Independent.

Kapwepwe says the World Bank is part of the corruption problem in Uganda. “For instance, if money is stolen during the implementation of the first phase of the Northern Uganda Social Action Fund (NUSAF I), why go ahead and approve NUSAF II and NUSAF III? Therefore, their departure becomes part of the solution.”

“I just wish they don’t come back because we have suffered enough at the hands of this colonial and neo-colonial instrument.”