The Uganda Bankers’ Association (UBA) has raised serious concerns over the proposed Protection of Sovereignty Bill, 2026, warning that its current provisions could introduce systemic risks to the financial sector, weaken investor confidence, and slow Uganda’s economic growth momentum, Pedson Mumbere reports.
The Protection of Sovereignty Bill, 2026, tabled in the Parliament recently, is a highly controversial legislative proposal designed by the Government of Uganda to regulate foreign influence by imposing strict oversight on financial inflows and political activities.
The proposed law criminalizes “disruptive funding” that is intended to influence domestic policy, and severe penalties for non-compliance, including fines up to UGX4 billion for companies and 20 years of imprisonment for individuals.
In a recent submission to the Attorney General, UBA acknowledged the Bill’s objective of safeguarding national sovereignty from external influence, but warned that several of its clauses may produce unintended consequences, particularly in relation to capital inflows, credit expansion, and overall financial stability.
According to the bankers’ body, the legislation risks creating uncertainty in Uganda’s investment climate at a time when the government is pursuing an ambitious economic expansion agenda.
UBA warned that the proposed law could have a “chilling effect” on investors, potentially undermining foreign direct investment and eroding confidence in Uganda’s financial system.
The association stressed that policy predictability remains a cornerstone of sustainable economic growth and argued that the Bill appears inconsistent with the government’s ATMS strategy, which targets a tenfold expansion of Gross Domestic Product.
That strategy relies heavily on attracting international capital and expanding private sector lending—both of which could be constrained if the Bill is enacted in its current form.
Among the key concerns raised is the Bill’s broad definition of an “agent of a foreigner,” which includes any person or entity financed or supervised by foreign interests.
UBA warned that this could inadvertently capture foreign-owned banks, correspondent banking partners, and international development finance institutions operating in Uganda, thereby disrupting essential financial linkages.
The association also flagged Clause 22, which requires ministerial approval for any foreign financial support exceeding Shs400 million (approximately USD 107,000) within a 12-month period.
UBA described this threshold as operationally impractical, noting that most banking transactions exceed that level.
It further warned that the provision allowing forfeiture of unapproved funds to the State poses significant risks to financial institutions that may inadvertently fall short of compliance.
Concerns were also raised about Clause 13, which introduces the offence of “economic sabotage.”
UBA argued that the provision is broadly and vaguely defined, creating potential legal exposure for financial analysts, auditors, and banking professionals who publish legitimate assessments of economic conditions, including sovereign risk and currency pressures.
The association further cautioned that the Bill could create regulatory overlap by granting extensive oversight powers to the Minister of Internal Affairs, potentially undermining the role and independence of the Bank of Uganda as the primary financial sector regulator.
It warned that such institutional ambiguity could complicate compliance and weaken regulatory effectiveness.
Commenting on the issue, Ugandan economist Fred Muhumuza said: “Investor confidence is highly sensitive to regulatory uncertainty.
When policy frameworks become unpredictable or overly restrictive, capital inflows tend to slow, and the private sector becomes more cautious about expanding investment.”
He added: “For an economy like Uganda’s, which depends on external financing and private sector credit to drive growth, it is critical that new legislation supports, rather than constrains financial intermediation and market confidence.”
UBA also highlighted the potential strain on correspondent banking relationships, warning that international financial institutions may become more cautious about maintaining ties if they risk being classified as “agents of foreigners.”
This could increase the cost and complexity of cross-border transactions and further isolate Uganda from global financial markets.
To mitigate these risks, the bankers’ association has proposed several amendments, including exempting financial institutions licensed by the Bank of Uganda and the Capital Markets Authority from the definition of “agent of a foreigner,” raising the approval threshold for foreign funding, and explicitly affirming the Central bank’s regulatory primacy.
As consultations continue, the banking sector joins a growing number of stakeholders cautioning that while the objective of protecting national sovereignty is valid, the current provisions of the Bill risk creating uncertainty in one of Uganda’s most critical economic sectors.
