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Denmark withholds 65 million crowns (7.5 million pounds sterling) of aid to Tanzania after "unacceptable homophobic comments" from a senior politician, said a minister.
Development Minister Ulla Tornaes did not name the person in charge, but said she was "very concerned" by the remarks.
Last month, Paul Makonda, commissioner of the commercial capital, Dar es Salaam, called on the public to report homosexual suspects to the police.
He said that he would set up a surveillance team to find homosexuals.
The government then stated that Mr. Makonda was expressing his personal opinion and not the government's policy.
Homosexual acts are illegal in Tanzania and punishable by up to 30 years in prison. Correspondents claim that statements against homosexuals have increased since the election of President John Magufuli in 2015.
In 2017, the country's deputy health minister defended the threat of publishing a list of homosexuals.
"I am very concerned about the negative developments in Tanzania – recently, the totally unacceptable homophobic statements of a commissioner," Ms. Tornaes said on Twitter.
"I have therefore decided to retain 65 million Danish kroner in the country." "Respect for human rights is crucial for Denmark."
Denmark is Tanzania's second largest aid donor.
Ms. Tornaes also postponed a planned trip to this East African country, reported the Danish broadcaster DR.
The Tanzanian government has not commented yet.
Mr Makonda – a loyal ally of the president – said last month that he was waiting for international critics for his position, but added, "I'd rather anger those countries than God."
The government has distanced itself from his views, claiming that he "only disseminated his personal opinion."
He added that the government "will continue to respect and enforce all human rights as provided by the country's constitution".
Earlier this month, 10 men were arrested for presiding over a gay marriage ceremony on the Tanzanian island of Zanzibar.
This action has been condemned by human rights groups.
In a statement on EU-Tanzania relations, the European Council announced that it would "carry out a comprehensive review of its policy" with regard to the country.
Citing an "unprecedented attitude", the Council again called on "the Tanzanian authorities to refrain from undue pressure and to limit diplomatic missions".
High Representative Federica Mogherini said that "the deterioration of the situation of LGBTI people" raised serious concerns.