Two articles that highlight the influence the IMF & World Bank can have on development.
World Bank postpones $90m Uganda loan over anti-gay law
The World Bank was set to approve a new project in Uganda to strengthen its health services
The World Bank has postponed a $90m (£54m) loan to Uganda over its tough new anti-gay law that has drawn criticism from around the world.
World Bank officials said they wanted to guarantee the projects the loan was destined to support were not going to be adversely affected by the new law.
The loan was intended to boost Uganda's health services.
The new law, enacted on Monday strengthens already strict legislation relating to homosexuals in the country.
It allows life imprisonment as the penalty for acts of "aggravated homosexuality" and also criminalises the "promotion" of homosexuality".
Elimination of discrimination
The law has been sharply criticised by the West, with donors such as Denmark and Norway saying they would redirect aid away from the government to aid agencies.
US Secretary of State John Kerry has called the law "atrocious". Both he and South African Nobel peace laureate Desmond Tutu compared it to anti-Semitic laws in Nazi Germany or apartheid South Africa.
A spokesman for the World Bank said: "We have postponed the project for further review to ensure that the development objectives would not be adversely affected by the enactment of this new law."
Anti-gay supporters in Uganda rejoiced when the law was passed on Monday
The loan was supposed to be approved on Thursday to supplement a 2010 loan that focused on maternal health, newborn care and family planning.
The World Bank's action is the largest financial penalty incurred on the Ugandan authorities since the law went into force on Monday.
In an editorial for the Washington Post, World Bank President Jim Yong Kim warned that legislation restricting sexual rights "can hurt a country's competitiveness by discouraging multinational companies from investing or locating their activities in those nations".
He said the World Bank would discuss how such discrimination "would affect our projects and our gay and lesbian staff members".
In his view, he adds, fighting "to eliminate all institutionalized discrimination is an urgent task".
Ugandan President Yoweri Museveni signed the anti-gay bill earlier this week, despite international criticism.
Ugandan authorities have defended the decision, saying President Museveni wanted "to demonstrate Uganda's independence in the face of Western pressure and provocation".
Uganda is a very conservative society, where many people oppose homosexuality.
I welcome this report from the IMF who seem to be suggesting that pure supply side policies that create inequality (simple unit 2 evaluation point) actually hinder economic growth.
Inequality might be falling between nations as a global middle class is emerging, but inequality is on the rise within nations. Quite why this is happening is a matter of debate, but the International Monetary Fund (IMF) has joined in the discussion asking if rising inequality is an obstacle to economic growth and development.
To general surprise, the Guardian reports IMF research which suggests that countries with high levels of inequality suffered lower growth than nations that distributed incomes more evenly. Backing analysis by the Keynesian economist and Nobel prizewinner Joseph Stiglitz, it warned that inequality can also make growth more volatile and create the unstable conditions for a sudden slowdown in GDP growth.
Even more controversially, the IMF said the supply side defence of inequality – that it gives the rich incentives to invest and the poor incentives to work has a very limited impact.
Obviously, some groups are pleased to hear this news, with Oxfam welcoming the report saying it shows "extreme inequality is damaging not only because it is morally unacceptable, but it's bad economics … redistribution efforts - essential to fight inequality - are good for growth is a welcome finding. Low tax and low public spending are clearly not the route to prosperity."
I expect there will be a backlash to the report, and the debate won’t end (you can read more here), especially in the US where studies show most of the country's income growth since the crash has gone to the richest 1%. Last year the UK's coalition government cut tax on incomes over £150,000 from 50p to 45p after a debate over the negative effects on growth of high taxes on wealthy individuals.
