‘Sovereignty Bill could spell economic disaster’ – Bank of Uganda governor warns MPs

• Bank of Uganda Governor Michael Atingi-Ego says the Sovereignty Bill could destabilise Uganda’s economy and weaken foreign reserves.

• He warned that reduced foreign inflows could push reserves down from the current nearly $6 billion and weaken the shilling.

• A weaker currency would increase import prices, raise inflation and possibly force higher interest rates.

• The World Bank has also warned that the Bill could disrupt development financing and investor confidence.

Bank of Uganda Governor Dr Michael Atingi-Ego has warned Parliament that the proposed Protection of Sovereignty Bill, 2026 could trigger serious economic instability, weaken Uganda’s foreign reserves and push inflation higher if passed in its current form.

Appearing before Parliament on Monday, Atingi-Ego told MPs that the Bill risks disrupting vital foreign inflows that support Uganda’s balance of payments and currency stability.

“Chairman, a country without reserves is not sovereign. The potential of this Bill to destabilize Uganda’s balance of payments is our primary concern as a central bank,” Atingi-Ego said.

He explained that Uganda recorded an overall balance of payments surplus of $1.5 billion last financial year, allowing the country to increase its foreign exchange reserves to nearly $6 billion.

“For example, last financial year the overall balance of payment surplus was USD 1.5 billion. That’s how we were able to increase our reserve coverage by USD 1.5 billion. Today as we speak our reserves are close to USD 6 billion,” he said.

“Why? Because these inflows have been coming in. The moment you tamper with these inflows here, we risk running down our reserves, and that is economic disaster for a country.”

The Governor also warned that the Bill could weaken the Uganda shilling by reducing investor confidence and slowing foreign capital inflows.

He said a depreciating currency would directly affect the cost of imported goods and increase domestic prices.

“The mandate of BoU is to promote price stability and a sound financial system. What is the impact of this Bill on price stability if it is passed the way it is?” he asked.

“Because of the depreciation of the currency that is likely to occur as an unintended consequence of this Bill, we are likely to have a depreciated currency and the pass-through of imported items into domestic prices is going to raise prices significantly.”

According to Atingi-Ego, this would force the central bank into a difficult position of either raising interest rates to control inflation or allowing inflation to rise above the target.

“This inflation of 3% we have been enjoying is likely to be compromised through currency depreciation,” he said.

The Bank of Uganda’s warning comes just days after the World Bank also expressed concern over the same Bill.

In its formal submission to Parliament’s joint committees on Defence and Internal Affairs and Legal and Parliamentary Affairs, the World Bank said the law could disrupt how international development institutions operate in Uganda.

The institution warned that the broad wording of the Bill could criminalise ordinary development work such as policy consultations, economic reports, governance assessments and lending discussions.

It also said the Bill could conflict with Uganda’s treaty obligations by failing to clearly protect the legal immunities of international organisations like the World Bank.

The World Bank argued that such uncertainty could hurt investor confidence and Uganda’s development partnerships.

The Protection of Sovereignty Bill, 2026 seeks to regulate foreign influence by requiring registration of “agents of foreigners,” restricting foreign funding and imposing heavy criminal penalties for activities seen as undermining national sovereignty.

Government says the Bill is intended to protect Uganda from undue foreign interference.

However, it has faced criticism from bankers, lawyers, human rights groups and opposition leaders, who argue that it could be abused to silence civil society, scare away investors and damage the economy.