Sovereignty Bill risks deterring investment and trade, bankers warn

In a letter to the Attorney General dated April 13, 2026, the local banks said the proposed law risks creating uncertainty in the investment climate and discouraging foreign direct investment at a time when Uganda is pursuing ambitious economic expansion.

The UBA cautioned that the Bill could have a “chilling effect” on potential financiers by eroding confidence in the country’s financial system.

“The proposed framework introduces uncertainty that may discourage international capital inflows and weaken investor confidence,” the association noted, emphasising that policy stability remains critical to sustaining growth and strengthening the banking sector.

The bankers further warned that the legislation could undermine the government’s goal of achieving a tenfold increase in Gross Domestic Product [GDP], which depends heavily on mobilising significant international capital to expand credit across sectors.

Among the key concerns raised are provisions in the draft law defining an “agent of a foreigner” as any individual or entity whose activities are financed or supervised by a foreigner. UBA argues that this definition could inadvertently classify foreign-owned banks, correspondent banking relationships and international development finance institutions as foreign agents.

The association also criticised Clause 22, which prohibits receiving foreign financial support exceeding Shs 400 million [approximately US$ 107,000] within a 12-month period without prior ministerial approval, describing the threshold as too low.

“Virtually all bank funding transactions exceed this amount,” the letter stated, warning that the provision could disrupt normal banking operations.

UBA added that international banks may become more cautious about maintaining relationships with Ugandan institutions if they risk being classified as foreign agents, potentially worsening the country’s already fragile correspondent banking position and increasing the cost of international transactions.

The Bill also proposes that funds obtained without approval may be forfeited to the State — a measure the association says creates an “existential risk” for banks that may inadvertently fail to comply.

In addition, the bankers expressed concern over vague wording in parts of the legislation, which they say could expose analysts and bank staff to prosecution for publishing legitimate reports on sovereign risk and currency pressures.

The UBA recommended that the government exempt financial institutions licensed by the Central Bank and the Capital Markets Authority from the definition of “agent of a foreigner”, raise the threshold for foreign funding, and provide blanket exemptions for routine, regulated banking activities.

Other contentious provisions include compliance obligations under Clause 25, which would bar financial institutions from processing transactions for “agents of foreigners” without verifying declarations and ministerial approvals, and require monthly reporting of such transactions to the Minister.

Section 21 on mandatory disclosure would compel detailed declarations on the source, amount and purpose of all foreign funding, with such information accessible to the public upon payment of a fee.

Meanwhile, Clause 13 introduces the offence of “economic sabotage”, criminalising the publication of information or engagement in activities deemed to “weaken or damage” the country’s economic system. The offence carries a penalty of up to 20 years’ imprisonment and could affect financial analysts, auditors and journalists reporting on fiscal policy or sovereign risk.

The Bill was tabled for its first reading in Parliament last week by the State Minister for Internal Affairs, Gen David Muhoozi, and has since been referred to the relevant committees for scrutiny.

Parliament has invited members of the public to submit their views to the joint committees on Defence and Internal Affairs, and Legal and Parliamentary Affairs, by April 24, 2026.

https://thecooperator.news/new-law-to-require-bankers-to-hold-professional-practising-licence/

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