Uganda’s legislative agenda has collided with macroeconomic prudence after Michael Atingi-Ego delivered a technically grounded caution on the proposed Protection of Sovereignty Bill 2026. Appearing before lawmakers, the central bank governor framed the Bill not merely as a legal instrument but as a potential macrofinancial shock with far reaching implications. He stressed that economic sovereignty is anchored in strong foreign exchange reserves, stable capital inflows and credible institutions, warning that legal provisions which constrain external financing could inadvertently weaken the country’s macroeconomic resilience.
From a balance of payments perspective, Atingi Ego explained that limiting foreign direct investment portfolio inflows and diaspora remittances would tighten Uganda’s capital and financial account. With a structurally persistent current account deficit driven by import demand, any disruption in external financing risks creating a foreign exchange gap. “A country without reserves is not sovereign. Restricting cross border inflows such as foreign investment remittances and portfolio capital will reduce the resources Uganda uses to finance imports and build reserves,” he told legislators. Such pressures would likely transmit into exchange rate depreciation, increased imported inflation and tighter domestic liquidity conditions.
The Bill’s regulatory framework also introduces risks to financial intermediation and market efficiency. Proposed caps on foreign funding and stricter compliance thresholds on cross border transactions could distort capital allocation and elevate the cost of doing business. In addition, clauses that criminalise certain economic reporting may weaken transparency and disrupt price discovery in financial markets. Investors rely heavily on open access to information when assessing risk and pricing assets, and any legal uncertainty around information flows could heighten sovereign risk premiums and increase Uganda’s external borrowing costs.
Institutionally, the proposed law raises questions about governance and regulatory overlap. Atingi Ego cautioned that the creation of parallel oversight structures could undermine the operational independence of the central bank, a key pillar in maintaining monetary stability and anchoring inflation expectations. At the same time, concerns from the diaspora highlight potential unintended consequences on remittance inflows, which are a major source of foreign exchange. Redefining citizens abroad within restrictive legal categories risks eroding trust, discouraging investment and tightening liquidity within the domestic financial system.
Global experience provides a useful lens for evaluating the potential outcomes. Countries such as Russia, Hungary and India have implemented similar controls with outcomes that include reduced capital inflows regulatory friction and constrained civic and financial space. In contrast, Georgia abandoned comparable proposals following strong public resistance and concerns over economic fallout. For Uganda, the central question remains how to design legislation that safeguards sovereignty while preserving capital mobility maintaining balance of payments stability and protecting the integrity of its financial system.
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