The World Bank has postponed a $90m (£54m) loan to Uganda because of a law passed this week that enforced tougher punishments for homosexuals.
"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," World Bank spokesman David Theis told The Guardian.
The law, passed by Ugandan President Yoweri Museveni, imposes stricter laws for gays including life sentences for "aggravated homosexuality" and bringing in a law that criminalises the failure to report anyone who breaks the anti-gay law.
World Bank president Jim Yong Kim said that the bank would oppose discrimination.
"In the coming months, we will have a broad discussion about discrimination with staff, management, and our board on these issues," Kim said. "Now is the right moment for this conversation."
The decision is surprising given that the World Bank commonly avoids making decisions based on political issues with a view to remaining impartial in the eyes of its 188 members.
Homosexuality is illegal in 37 African countries and 83 worldwide but the law passed by Museveni has led to widespread criticism in Western nations.
Norway and Denmark have decided to withhold donations to Uganda because of the law while the United States has announced that it is reviewing its relationship with the African country.
The World Bank still retains a $1.56 project portfolio in Uganda despite the decision to delay the loan.
This week a Ugandan reverend claimed that heterosexual rape is preferable to homosexual intercourse, implying that hetrosexual child rape was "natural."