The signing of Uganda’s Anti-Gay Bill in late 2013 has seriously backfired on the economy, with some European nations threatening to pull aid from the African nation. The law – which effectively means a life sentence for anyone convicted of having gay sex – has shaken the Western world and incited campaigns worldwide. But an equally big impact was felt by the Ugandan economy this week, after the World Bank postponed a loan of $90 million that was to be given to the Ugandan government in order to strengthen the country’s healthcare systems. They plan to withhold the loan until they can assess the impact of this new law.

Shilling Down but Uganda Defiant 

Since the anti-homosexuality bill was signed by President Yoweri Museveni in February, the Ugandan shilling – whose performance has generally been amongst the strongest of the African currencies – has fallen more than 2 per cent against the American Dollar, despite the central bank stepping in to taper the decline. Understandably, this has seen many investors racing to Currencies Direct every couple of hours to assess the damage. Regardless, President Museveni retaliated this week, responding defiantly to global criticism. Ugandan government spokesperson Ofwono Opondo stated on his official Twitter feed that Western aid to Africa was a “lucrative and profitable trade they cannot cut off completely. Africa must stand up to western domination”.

Not a Foregone Conclusion

Being that certain western donors rely on Uganda to assist in fighting Islamists in Somalia, most analysts believe it is highly unlikely that the west will cut off aid to the country entirely, despite the fact that Denmark, Norway and Sweden have all pledged to withdraw at least some of their aid, following a law that is seen as completely inhumane by the vast majority of the western world. However some programmes will definitely be affected, which could have a devastating effect on the Ugandan economy. For example, the United States spends over $485 million on bilateral aid to the African nation every year, with a strong emphasis on health and military programmes. If this were cut, not only would Uganda’s infrastructure suffer, but they would also struggle in their ability to attract foreign investment and borrow in domestic bond markets. Having said that, Uganda has brushed off previous cuts to their aid, so refusal to change their policies in this instance might not necessarily equal a death sentence for the economy. Regardless though, the Ugandan government – despite their deeply ingrained attitude towards sexuality – should think very carefully about the social (as well as financial) knock-on effects of this new law.

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Uganda Set to Create Bigger Rift with West

Every month it seems that another state in the U.S. legalises gay marriage and opens its doors to a more diverse and understanding society. The Ugandan anti-gay law clearly stands in direct opposition to these values, and the values of much of the western world for that matter. So before creating a rift that would see them ostracised from any links with the western nations, Uganda may want to reconsider the foundations of this newly-legalised prejudice.