Bankers warn sovereignty Bill could rattle Uganda’s financial sector, scare investors

Kampala. The Uganda Bankers’ Association (UBA) has raised red flags over the proposed Protection of Sovereignty Bill, 2026, warning that its provisions could unsettle the financial sector, weaken investor confidence and slow down Uganda’s economic growth ambitions.

In a submission to the Attorney General dated April 13, 2026, the bankers’ body cautioned that while the Bill is aimed at regulating foreign influence, several of its clauses may have unintended consequences for investment flows, credit expansion and the stability of the banking system.

The association warned that the proposed law risks creating uncertainty in Uganda’s investment climate at a time when government is pursuing an aggressive economic expansion agenda.

UBA said the legislation could trigger a “chilling effect” on investors, potentially undermining foreign direct investment and weakening confidence in Uganda’s financial system.

The bankers urged government to reconsider parts of the Bill, arguing that policy predictability and investor confidence remain central to sustaining economic growth.

They warned that the Bill appears to contradict government’s ATMS strategy, which targets a tenfold expansion of Gross Domestic Product (GDP), a goal that depends heavily on attracting international capital and expanding private sector credit.

According to UBA, restrictive provisions on foreign funding could limit access to the very capital required to finance that growth.

The association highlighted what it described as “problematic clauses” in the draft legislation, saying they could have far-reaching implications for the financial sector.

One of the key concerns is the broad definition of an “agent of a foreigner”, which includes any person or entity whose activities are financed or supervised by a foreign entity.

UBA warned that this definition could unintentionally capture foreign-owned banks, correspondent banking relationships, and international development finance institutions operating in Uganda.

The bankers also raised concern over Clause 22, which requires ministerial approval for any foreign financial support exceeding Shs400 million (about USD 107,000) within a 12-month period.

UBA described the threshold as “extremely low”, noting that most banking transactions and funding arrangements exceed that amount.

They further warned that funds received without approval could be forfeited to the State, describing this as an “existential risk” for financial institutions that may fall afoul of the requirement.

Another contentious provision is Clause 13, which introduces the offence of “economic sabotage”, criminalising actions or publications deemed to weaken the country’s economic system.

UBA said the wording is vague and could expose financial analysts, auditors and even bank staff to prosecution for publishing legitimate assessments of sovereign risk, currency pressures or macroeconomic conditions.

The association also warned that the Bill could create a “parallel and potentially conflicting regulatory regime” by giving significant oversight powers to the Minister of Internal Affairs.

UBA argued that this risks undermining the operational independence of the Bank of Uganda, which is the primary regulator of the financial sector.

To address these concerns, the bankers’ body 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”.

They also called for a higher threshold for foreign funding approvals or a blanket exemption for routine, regulated banking transactions.

The association further recommended that the Bill explicitly affirm the primacy of the Bank of Uganda in regulating the financial sector to avoid institutional overlap.

“International banks may become more cautious about maintaining relationships if they fear being classified as agents,” the UBA said in its letter.

It warned that this could worsen Uganda’s already fragile correspondent banking relationships and increase the cost of cross-border transactions.

The Protection of Sovereignty Bill, 2026, is still in the early stages of the legislative process.

It was first tabled for reading on April 15, 2025, by the Minister of State for Internal Affairs, Gen. David Muhoozi.

The Bill introduces wide-ranging regulatory and criminal provisions affecting foreign funding, financial transactions and information dissemination.

Under Clause 22, any foreign financial support above Shs400 million within a year requires prior written approval from the Minister of Internal Affairs.

The provision applies to loans, grants and capital injections, including those affecting banks and large commercial transactions.

Clause 25 imposes compliance duties on financial institutions, requiring banks to verify ministerial approvals before processing transactions involving “agents of foreigners”.

Banks would also be required to submit monthly reports on such transactions to the Minister.

Under Section 21, institutions must disclose the source, purpose and amount of foreign funding received.

These declarations may also be accessed by the public upon payment of a prescribed fee.

Clause 13, on “economic sabotage”, criminalises activities or publications considered to undermine Uganda’s economic stability, carrying penalties of up to 20 years in prison.

The provision has raised concern among financial sector stakeholders, who argue it could have a chilling effect on research, reporting and policy analysis.

Parliament has since invited public submissions on the Bill.

The Clerk to Parliament, Adolf Mwesige Kasaija, said stakeholders and citizens have until Friday, April 24, 2026, to submit their views to the Joint Committee on Defence and Internal Affairs and the Committee on Legal and Parliamentary Affairs.

The Bill is expected to be among the last major pieces of legislation considered by the current Parliament as it winds up its term.

During its first reading, some Members of Parliament, including Mr Theodore Ssekikubo, raised procedural concerns, arguing that the Bill was being fast-tracked and that legislators had not been adequately provided with copies for scrutiny.

As consultations continue, the banking sector has joined a growing list of stakeholders warning that while the objective of protecting sovereignty is important, the current provisions risk creating uncertainty in one of Uganda’s most critical economic sectors.