Sovereignty Bill is Radical and Could trigger Economic Suicide- BOU Governor Warns Risking a Reverse of three Decades of Economic Gains, Hilling Slide and Fuel Inflation Pressures

By Abraham Lincolns

The Governor of the Bank of Uganda, Michael Atingi-Ego, on Tuesday warned that the proposed Protection of Sovereignty Bill 2026 could destabilize the financial system, trigger capital flight, and undermine Uganda’s “Tenfold Growth” strategy, cautioning that several clauses risk choking foreign investment, remittances, and economic transparency.

The Governor issued a sharp warning over the proposed Bill cautioning Parliament that the legislation could trigger capital flight, disrupt financial stability, and undermine Uganda’s long-term economic ambitions.

In a technical submission to the Joint Committee on Defence and Internal Affairs, Atingi-Ego said that while protecting national interests is a legitimate state objective, the Bill in its current form introduces “radical uncertainty” that risks reversing three decades of economic gains.

“The financial system’s technical architecture must remain shielded from regulatory fragmentation,” he stated. “The Bill, in its current form, risks undermining the very economic strength upon which true national sovereignty is built.”

A central concern raised by the Governor is the Bill’s broad definition of “agents of foreigners.” Under

the proposed law, any individual or entity receiving foreign funding would be required to register with the Ministry of Internal Affairs—a provision he warned could unintentionally capture millions of Ugandans in the diaspora.

With remittances estimated at about USD 1.5 billion in 2025, Atingi-Ego cautioned that classifying such inflows as “foreign agency” could disrupt household incomes and weaken foreign exchange liquidity, placing pressure on the shilling.

“Clause 1’s definition of a ‘foreigner’ includes Ugandan citizens residing abroad,” he noted. “Restricting these inflows risks exchange-rate volatility and import cost spikes.”

The Governor also raised concerns about Clause 22, which proposes a UGX 400 million (approximately USD 106,000) cap on foreign financial support without ministerial approval. He argued that the restriction is incompatible with the operational realities of modern banking and investment flows.

“This cap would severely restrict capital injections, intercompany and shareholder loans, and correspondent banking facilities—all essential for liquidity management,” the assessment reads.

 He further warned that international correspondent banks could sever ties with Ugandan financial institutions to avoid regulatory risk, potentially isolating the country from global payment systems and constraining trade finance.

Another major point of contention is Clause 13, which criminalises the publication of information deemed to “weaken or damage the economic system,” with penalties of up to 20 years in prison. Atingi- Ego warned that this could have a chilling effect on economic research and central bank transparency.

“If the Bank of Uganda or its officers publish a report showing rising inflation or currency depreciation, could that be interpreted as economic sabotage?” he asked. “By criminalising economic research that identifies fiscal instability, the Bill destroys price discovery, forcing investors to demand an uncertainty premium that increases the national debt burden.”

He urged Parliament to exempt regulated financial institutions from the Bill and remove what he described as intrusive provisions, including requirements to assess the physical and mental health of

bank directors. Atingi-Ego concluded by cautioning lawmakers that Uganda’s “Tenfold Growth” strategy—targeting a USD 500 billion economy by 2040—depends heavily on policy predictability and continued access to global capital.

According to the BOU, because of the depreciation of the currency that is likely to occur as an unintended consequence of this Bill, Uganda is likely to have a depreciated currency and the pass- through of imported items into domestic prices is going to raise prices significantly with an inflation that could rise above the central bank’s 5% target.

The warning comes at a time when the Shilling has shown mixed but generally resilient performance against major currencies, supported by seasonal inflows from exports, remittances, and development financing.

Regionally, the shilling has maintained moderate stability against the Kenyan Shilling, trading roughly around 1 KES = Shs28–30, and against the Rwandan franc, where it has remained broadly steady due to closely linked cross-border trade dynamics. Currency weakness typically raises the cost of imported goods such as fuel, machinery, medicines, and industrial inputs.

The debate now places Parliament at the centre of balancing sovereignty-driven legislative goals with macroeconomic stability considerations. While proponents of the Bill argue for stronger national control frameworks, the central bank is urging technical revisions to avoid destabilising financial systems built over decades of liberalisation.