BOU governor Atingi-Ego say Sovereignty Bill could trigger financial shocks

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Bank of Uganda (BoU) governor Michael Atingi-Ego has warned Parliament that the proposed Protection of Sovereignty Bill, 2026, once passed and signed into law, could introduce significant risks to Uganda’s financial system, potentially destabilising key economic inflows and undermining long-term growth targets.

Appearing before the joint committees on legal and parliamentary affairs and defence and internal affairs on April 27, 2026, Atingi-Ego led a team of central bank officials in presenting a technical assessment of the Bill, cautioning that while its objective is legitimate, its design may have far-reaching unintended consequences.

“The Bill, in its current form, risks introducing regulatory fragmentation and ‘voluntary shocks’ into the economy,” the Governor told lawmakers, warning that such disruptions could weaken the very economic foundation required to sustain national sovereignty.

A key concern raised by the central bank is the proposed cap on foreign funding set at 20,000 currency points, equivalent to about shillings 400 million (about $106,000) annually, beyond which ministerial approval is required.

BOU said this threshold is incompatible with the scale of Uganda’s financial system, particularly in the banking sector, where capital requirements are significantly higher.

For instance, the central bank pointed out that Tier 1 capital requirements stand at shillings 150 billion, while Tier III and Tier IV institutions require shillings 10 billion and between shillings 0.5 billion and 1.5 billion, respectively, making the proposed cap restrictive for routine capital mobilisation and financial operations.

External financial position

The Governor also highlighted risks to Uganda’s external financial position, noting that in the 2024/25 financial year, the country recorded a Balance of Payments surplus of $1.5 billion, supported by a financial account surplus of $4.6 billion, including $3.4 billion in Foreign Direct Investment (FDI) and $2.1 billion in portfolio investment.

He warned that restrictions on cross-border financial flows could disrupt these inflows, potentially reducing foreign exchange liquidity and placing pressure on the Ugandan shilling.

Particular concern was raised over diaspora remittances and development financing. According to the BoU, workers’ remittances amounted to $1.5b in 2025, while NGO-related inflows stood at $420.8 million.

“Clause 1’s definition of a ‘foreigner’ includes Ugandan citizens residing abroad,” the submission notes, cautioning that this could result in remittance recipients being classified as “agents of foreigners,” thereby subjecting them to registration and funding restrictions.

The central bank warned that disrupting these flows could have direct implications on household consumption, education financing and micro-investments, which rely heavily on diaspora support.

Offshore investors under threat

Atingi-Ego further told legislators that offshore investors currently hold about 12% of Uganda’s government securities, cautioning that the Bill’s approval requirements could act as a form of capital control.

“Experience shows such controls lead to the immediate exit of offshore investors, put pressure on the shilling and force interest rates up,” the BOU submission says.

He also highlighted the potential impact on public debt, noting that debt servicing already consumes nearly 50% of government revenue, and warned that increased uncertainty could push investors to demand higher returns, effectively raising the cost of borrowing.

The central bank raised additional concerns about the Bill’s provision on “economic sabotage,” which criminalises the publication of information deemed harmful to the economy. Atingi-Ego questioned whether such provisions could undermine economic research and policy communication.

“If the BOU or its officers publish a report showing rising inflation or currency depreciation… could that be interpreted as economic sabotage?” the submission queried, warning of a potential chilling effect on market transparency and informed decision-making.

Risk of isolation from global payment system

In the financial sector, BOU cautioned that the Bill could trigger “de-risking,” where international banks sever relationships with Ugandan institutions due to increased compliance uncertainty. This, the central bank noted, could isolate Uganda from global payment systems.

The digital economy could also be affected. BOU noted that Uganda currently has 36.3 million mobile money accounts handling about 27 million transactions daily and warned that manual approval processes proposed under the Bill are incompatible with real-time financial systems.

Beyond financial markets, the central bank flagged broader socio-economic risks, indicating that approximately Sh5 trillion in external funding and between 20,000 and 50,000 jobs are linked to organisations that could be affected by the Bill’s provisions.

The Governor emphasised that Uganda’s economic progress over the past three decades has been anchored on policy predictability and openness to international financial flows.

“The administrative friction created by a $106,000 funding cap is fundamentally incompatible with the country’s long-term growth ambitions,” BOU said, referencing Uganda’s target of becoming a $500 billion economy by 2040.

While acknowledging the importance of safeguarding national sovereignty, the Bank of Uganda urged Parliament to refine the Bill to ensure alignment with existing financial regulations and preserve the central bank’s operational independence.

“True national sovereignty is built on economic strength and financial independence,” Atingi-Ego said, calling for a balanced approach that protects national interests without undermining financial stability.