Bank of Uganda Governor Dr. Michael Atingi-Ego has warned that the proposed Protection of Sovereignty Bill could destabilise Uganda’s external financial position, weaken foreign reserves, and fuel inflation if enacted in its current form.
Appearing before Parliament, Atingi-Ego said the central bank’s main concern is the possible disruption of foreign inflows that support the country’s balance of payments.
“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,” he told MPs.
He noted that Uganda’s reserves have grown in recent years due to sustained inflows from exports, remittances, development financing and foreign investment.
“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.
Atingi-Ego warned that any restrictions affecting these inflows could quickly reverse the gains made in strengthening the country’s reserve position.
“The moment you tamper with these inflows here, we risk running down our reserves, and that is economic disaster for a country.”
Concerns over external accounts
The Protection of Sovereignty Bill, 2026, currently under parliamentary review, seeks to regulate foreign funding, influence, and cross-border financial activity involving individuals, organisations, and diaspora actors linked to Uganda.
While government supporters argue the Bill is aimed at protecting national sovereignty, the central bank says it could have unintended consequences on Uganda’s external accounts.
Atingi-Ego said stability in the balance of payments has been central to maintaining macroeconomic stability, particularly the strength of the shilling.
Inflation warning
The Governor also raised concern over the inflation outlook, warning that any disruption in inflows could trigger currency depreciation and push up prices of imported goods.
“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.
He added that a weaker currency would feed directly into domestic prices.
“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.”
Uganda has in recent periods maintained relatively low inflation, averaging around 3 percent, which the central bank says is within its target range.
However, Atingi-Ego warned that this stability could be affected.
“This inflation of 3% we have been enjoying is likely to be compromised through currency depreciation.”
Policy dilemma ahead
The Governor also said the central bank could face difficult choices if inflation rises due to exchange rate pressures.
“That means that we will need to either tighten monetary policy further if we are going to contain inflation, or we allow inflation to go beyond the 5% target if we don’t want to raise interest rates,” he said.
Such a scenario, he noted, would force policymakers to balance inflation control with the need to support economic growth through interest rate decisions.
Debate intensifies
The Protection of Sovereignty Bill has already drawn mixed reactions from lawmakers, civil society groups, and legal experts.