Uganda’s central bank has raised a red flag over the proposed Protection of Sovereignty Bill, 2026, warning that it could unintentionally weaken the economic stability that underpins the country’s independence.
While appearing before a joint committee on Defence and Internal Affairs and Legal and Parliamentary Affairs on Tuesday, Bank of Uganda Governor Michael Atingi-Ego expressed concern about the proposal in the Bill to limit foreign financial inflows.
The law seeks to cap funds from foreign sources at about Shs400 million unless approved by a minister. While this is intended to control external influence, the central bank says it poses serious risks because Uganda depends heavily on money coming in from abroad—such as investments, remittances, and development support—to keep the economy running smoothly.
According to the Bank, these inflows play a crucial role in building the country’s foreign exchange reserves. These reserves allow Uganda to pay for essential imports like fuel, medicine, and machinery, help stabilise the Uganda shilling, and provide a financial cushion during economic shocks. The governor warned that cutting back on inflows could quickly erode this safety net. “A country without reserves is not sovereign,” he said, emphasising that economic strength is a key part of national independence. Uganda currently holds nearly $6 billion in reserves, largely built from consistent inflows.
The Bank also cautions that reducing foreign inflows could weaken the Uganda shilling. When fewer dollars enter the economy, demand for foreign currency can outstrip supply, leading to depreciation of the local currency. This would make imports more expensive and push up the cost of living. In turn, inflation could rise. Although inflation is currently relatively low, at around 3 percent, the central bank warns that this stability could be lost if the currency weakens.
If inflation begins to climb, the Bank of Uganda would be forced into difficult choices. It could raise interest rates to control rising prices—a move that often slows economic growth—or allow inflation to exceed its 5 percent target. Either option would come with consequences for businesses and households.
The broader concern is the impact on Uganda’s balance of payments, which tracks money flowing in and out of the country. Uganda recently recorded a surplus of about $1.5 billion, meaning inflows exceeded outflows. This surplus helped strengthen reserves and stabilise the economy. However, the central bank warns that restricting inflows could reverse these gains. “The moment you tamper with these inflows… we risk running down our reserves, and that is an economic disaster,” the governor cautioned.
While the Bank of Uganda does not oppose the goal of protecting national sovereignty, it argues that the approach taken in the Bill could backfire. Efforts to limit foreign influence, it says, may end up cutting off the very financial flows that sustain economic stability.
In essence, the central bank’s message is that economic strength is a core part of sovereignty. If foreign inflows are restricted too sharply, Uganda risks draining its reserves, weakening its currency, increasing inflation, and destabilising the wider economy. In its current form, the Bank warns, the Bill could do more harm than good.
