World Bank’s Uganda Funding Suspension: The Struggle for Funds and Sovereignty

On August 8, 2023, the World Bank made an announcement, stating that it had suspended all new public financing to Uganda due to concerns regarding the country’s anti-homosexuality law, which was deemed to be in fundamental contradiction with the values upheld by the World Bank Group.

Human Rights Watch pointed out that this anti-homosexuality law violated several fundamental rights guaranteed by Uganda’s constitution and various international human rights agreements that Uganda had ratified. The law was initially proposed in March 2023 and subsequently adopted by the Ugandan parliament in early May.

The World Bank, as well as the broader diplomatic and donor community, closely monitors developments in Ugandan politics. The bank’s relatively swift response in issuing this statement, within three months, is noteworthy. The World Bank is typically considered a slow-moving organization due to its thorough due diligence processes and the need to secure consensus among its member states. The relatively quick response suggests potential internal pressure from key stakeholders or member states, shedding light on the bank’s nuanced relationship with its client states’ domestic politics and its approach to addressing political concerns.

The World Bank is mandated to remain apolitical, as stated in Article IV, Section 10 of its articles of agreement, which prohibits interference in the political affairs of its member states. However, its mission to “end extreme poverty and promote prosperity in a sustainable way” inherently requires political actions.

As a social anthropologist who has studied international aid in East Africa, particularly the World Bank’s engagement with Uganda since 2006, I see the suspension of funding over the anti-homosexuality law as consistent with the bank’s historical involvement in the domestic affairs of client states. Previous interventions by the World Bank have encompassed issues such as presidential term limits, market reforms, and governance reforms.

These interventions should be viewed in the context of the informal and indirect methods the World Bank employs to influence its clients. Despite emphasizing national ownership of its projects, the World Bank uses its lending portfolio as a means to govern and control its clients.

For instance, in 2005/6, the World Bank reduced its loans to Uganda by 10% due to technical issues (referred to as “prior actions”) that the government had failed to implement before signing the loan agreement, leading to budget overruns in public administration. However, this reduction was likely driven by political considerations as the World Bank expressed frustration when President Yoweri Museveni lifted presidential term limits to seek re-election.

The recent response to the anti-homosexuality law demonstrates both continuity and change in the World Bank’s approach to domestic political affairs. While the bank has historically acted indirectly through technocratic means, this response is explicitly linked to values. This suggests that the institution’s major stakeholders and shareholders have played a significant role in shaping its stance.

During the structural adjustment era, World Bank loans to Uganda and other recipients came with strict conditions and predefined policies, often involving political and ideological measures such as privatization and economic liberalization. Later, the bank shifted to making concessional lending contingent on the recipient government creating its own national poverty reduction strategy, which the bank would endorse, bypassing questions of external governance and policy imposition.

As the World Bank withdrew from direct control, it sought to retain influence through its ability to frame partnerships and conditions for the recipient state’s exercise of its granted freedom. The bank’s approval remains necessary for national development policy to become effective, allowing it to govern from a distance. This indirect governance structure portrays client governments as both objects to be shaped by donor policies and subjects with whom agreements are made.

The dynamics of how the World Bank governs and engages with its clients, not just in Uganda, have evolved over time, shifting from direct power and policy imposition to more indirect and tacit forms of influence presented as mutual partnerships. The Ugandan government’s adoption of the anti-homosexuality law, despite the bank’s indirect governance and technocratic oversight, may be seen as a failure of the partnership arrangement and the bank’s ability to exert influence from a distance.

Efforts by international donors, including the United States and the European Union, to lobby and persuade the Ugandan government to abandon the anti-homosexuality law proved unsuccessful. Moreover, new actors, including China, the Gulf states, Russia, and private entities, are increasingly emerging as sources of financing, potentially replacing traditional Western donors, leading to increased geopolitical competition on the African continent. However, these new actors come with their own conditions and expectations, making the World Bank, with its commitment to transparency and democracy, a potentially preferable partner.

A return to more direct, conditionality-based governance, as seen during the structural adjustment era, could address issues related to values but may jeopardize the principles of national ownership and mutual partnership.