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Kampala, Uganda | URN | The Uganda Bankers’ Association (UBA) has raised concern over the draft Protection of Sovereignty Bill 2026, warning that it could negatively impact Uganda’s financial sector and slow down economic growth.
In a letter addressed to the Attorney General on April 13, 2026, the bankers’ body said the proposed law, intended to regulate foreign influence, may create uncertainty in the investment climate and discourage foreign direct investment at a time when Uganda is pursuing ambitious economic expansion.
UBA cautioned that the bill could trigger a “chilling effect” on investors, potentially weakening confidence in the country’s financial system and undermining efforts to attract capital needed for development.
The association urged the government to carefully reconsider the proposed legislation, arguing that policy stability and investor confidence remain critical to sustaining growth and strengthening Uganda’s banking and broader economic sectors.
The bankers’ primary concern is that the bill works directly against the government’s own ATMS strategy, which aims for a tenfold increase in GDP.
They note that achieving this target requires rationalizing significant international capital to expand private sector credit.
According to the UBA, the bill’s restrictive provisions on foreign funding could jeopardize access to the very capital needed to fund this growth.
The UBA highlighted several “problematic” clauses in the draft legislation, including the bill, which broadly defines an “agent of a foreigner” as any person or entity whose activities are financed or supervised by a foreigner.
UBA notes that this could technically classify foreign-owned banks, correspondent banking relationships, and international development finance as “foreign agents”.
On Clause 22, which prohibits obtaining foreign financial support exceeding 400 million Shillings (approx. USD 107,000) within 12 months without prior Ministerial approval, the Bankers argue this threshold is “extremely low,” as nearly all bank funding transactions exceed this amount.
The Bankers also note that money obtained without approval could be forfeited to the State, creating what the UBA calls an “existential risk” for banks that may inadvertently fail to comply.
UBA also notes that the bill criminalizes activities that “weaken or damage the economic system”.
The Uganda Bankers’ Association says the wording is vague and that it could lead to the prosecution of analysts or bank staff who publish honest reports on sovereign risk or currency pressures.
The UBA warned that the bill creates a “parallel, potentially conflicting regime”. By vesting significant oversight powers in the Minister of Internal Affairs, the law may undermine the operational independence of the Bank of Uganda, the primary regulator for the banking sector.
To mitigate these risks, the association has urged the government to carve out financial institutions licensed by the Central Bank and Capital Markets Authority from the “agent of a foreigner” definition.
They also urge the government to establish a higher threshold for foreign funding or provide a blanket exemption for normal regulated banking activity.
They suggest that the government should, in the proposed law, affirm the primacy of the Bank of Uganda’s regulatory authority over the sector.
“International banks may become more cautious about maintaining relationships if they fear being classified as agents,” the letter stated, noting that this could worsen Uganda’s already fragile correspondent banking situation and increase the cost of international transactions.
The Protection of Sovereignty Bill, 2026, introduces significant regulatory and criminal liabilities for the banking sector in Uganda, primarily focusing on the control of foreign capital and the reporting obligations of financial institutions.
Some of the clauses impacting the banking sector are Clause 22: Cap on Foreign Funding and Ministerial Approval.
This clause prohibits any person or “agent of a foreigner” from receiving financial support (loans, donations, or grants) exceeding 400 million Shillings (20,000 currency points) within 12 months without prior written approval from the Minister of internal affairs.
This applies to capital injections for banks and large-scale commercial loan disbursements.
In Clause 25: Compliance Duties for Financial Institutions, banks are barred from processing transactions for “agents of foreigners” unless proper declarations and ministerial approvals are verified. Furthermore, banks must submit monthly reports of all such transactions to the Minister.
Section 21: Mandatory Disclosure- requires detailed declarations of the source, amount, and purpose of all foreign funding. These declarations are not confidential and may be accessed by the public upon payment of a fee.
Clause 13: Offence of “Economic Sabotage”- criminalizes the publication of information or participation in activities that “weaken or damage the economic system or viability of the country.” This carries a penalty of up to 20 years in prison and could impact financial analysts, auditors, or journalists who report on sovereign risk or fiscal policy.
The bill is currently in the early stages of the legislative process, with its first reading conducted on April 15, 2025, by the Minister of State for Internal Affairs, Gen. David Muhoozi.
The Clerk to Parliament, Adolf Mwesige Kasaija, issued a public notice calling for the public to submit their views o the Bill before the Joint Committee on Defence and Internal Affairs and the Committee on Legal and Parliamentary Affairs. He said the submissions should not be later than Friday, 24 April 2026.
It is expected that the Bill will be among the last laws to be considered by the current Parliament as it winds up business.
During the first reading, some Members of Parliament (notably . Theodore Ssekikubo) raised procedural concerns, arguing that the bill was being “pushed” too quickly and required more transparency and a thorough distribution of copies to all legislators.
