'Odd Couple' visit Uganda as storm brews over aid

The Irish rock star Bono and the US Treasury Secretary, Paul O'Neill, arrived in Uganda last night amid a growing storm over government plans to cap spending on Aids drugs, malaria nets and other life-saving medicines.

Ugandan ministers say they might have to refuse millions of pounds in extra health aid to follow strict economic guidelines imposed by the International Monetary Fund (IMF).

The move has drawn a furious reaction from aid agencies led by the influential Harvard University economist Jeffrey Sachs, who visited Uganda last January with Bono, the pop supremo turned Third World campaigner. In a strongly worded letter to the Ugandan government last week, Mr Sachs accused the IMF of encouraging the Ugandan government to turn down fresh health funds.

Its argument that a sudden influx of cash could destabilise the currency was "preposterous", he said. "This is life and death, not a game," he said in the letter, which an indignant Catholic bishop read out during a heated meeting between the government, donors and the IMF last week.

The IMF and World Bank have often been criticised for imposing free-market liberalisation and health cuts on impoverished African countries. As the American representative, Mr O'Neill is the most influential member of the IMF board of directors.

The controversy exposes key differences between him and his celebrity travelling partner in Uganda. Mr O'Neill, a multimillionaire and former corporate boss, is sceptical of foreign aid to the Third World. He sees African countries as problem businesses in need of economic troubleshooting and a leg up into the global economy.

Bono and most of the aid community argue that health, education and debt cancellation must take priority. He is using the trip to persuade the powerful Republican that aid can work and is urgently needed.

So far the tour of the poor by the incongruous pair – commonly referred to as the Odd Couple – has produced some memorable moments.

One day, Bono broke into a verse of I Still Haven't Found What I'm Looking For for a group of Ghanaian school children as Mr O'Neill – the world's most powerful finance minister – looked on. Another time, the two men found themselves stranded for six hours in a remote airport while a violent storm raged outside.

Mr O'Neill and his security guards took refuge in the VIP lounge; Bono had a few drinks in the bar with journalists.

There have been other differences. In South Africa, Bono brought up the recent sharp increase in American farm subsidies during a meeting with President Thabo Mbeki. The issue might have embarrassed Mr O'Neill as the IMF and the World Bank – of which America is the largest shareholder – have forced many African countries to drop subsidies.

Tomorrow they leave Uganda for Ethiopia, the last leg of the trip. Uganda is seen as a success story in a continent of aid failures. Foreign donors pay for more than half the national budget because the government assiduously follows dictates of economic discipline. It has worked: poverty levels have dropped from 56 per cent in 1990 to 35 per cent today. Britain is the biggest donor.

Bono wants to show Mr O'Neill how $90m (£62m) in debt forgiveness has more than doubled school attendance.

Aid workers worry the government has become obsessed with free-market policy prescriptions. The health budget row, which centres on the new Global Fund for Aids, Malaria and Tuberculosis, has crystallised that debate. According to the multibillion-dollar fund's guidelines, governments must spend its money in addition to – and not as a substitute for – existing health budgets.

The Ugandan government worries that a sudden, large influx of hard currency could increase its low inflation rate and destabilise its currency.

"We cannot increase spending on health or education by simply raising total government spending," said Sam Kutesa, a junior finance minister, last week.

His government recently clashed with Norway after $3m of aid earmarked for health was diverted into the foreign currency reserves.