Sovereignty Bill risks shilling collapse, investor exodus and debt crisis, BoU’s Atingi-Ego warns parliament

KAMPALA, April 29, 2026 — The Governor of the Bank of Uganda [BoU], Michael Atingi-Ego, has cautioned Parliament that passing the Protection of Sovereignty Bill, 2026 in its current form could destabilise Uganda’s economy, weaken the shilling, choke financial inflows and severely strain the country’s ability to service public debt.

Appearing alongside his deputy, Augustus Niwagaba, before Parliament’s Joint Committee on Defence and Internal Affairs and the Committee on Legal and Parliamentary Affairs, Atingi-Ego yesterday set out the central bank’s strongest objections yet to the controversial legislation.

He told legislators that the bill directly interferes with cross-border financial flows, which are critical to sustaining Uganda’s balance of payments and overall macroeconomic stability.

“Chairman, let me be very clear from the outset: this bill is about cross-border payments, and cross-border payments are about the balance of payments,” Atingi-Ego said.

He explained that Uganda has consistently run a current account deficit, driven by a higher import bill than export earnings, making the country heavily reliant on external financial inflows to bridge the gap.

“In Uganda’s case, the current account balance has always been negative because our imports are far greater than our exports. So how do we close this gap? It is through financial flows,” he said.

According to the Governor, the proposed restrictions in the bill risk cutting off these critical inflows, with immediate and far-reaching consequences.

“This bill introduces restrictions on cross-border transactions, meaning it restricts inflows into the country. We therefore run the risk of substantially reducing those inflows,” he warned.

He cautioned that such a move would widen the external imbalance and force painful economic adjustments, particularly through exchange rate depreciation.

“So how then does the balance of payments adjust? We are likely to see a substantial depreciation of the currency, because imports would need to become more expensive in order to align with exports,” he said.

Atingi-Ego further warned that Uganda’s foreign exchange reserves, currently estimated at nearly US$6 billion, could be rapidly eroded if inflows decline.

“The moment you tamper with these inflows, we risk running down our reserves, and that is an economic disaster for any country. A country without reserves is not sovereign,” he said.

He noted that in the last financial year Uganda recorded a balance of payments surplus of about $1.5 billion, which helped strengthen reserve buffers.

On remittances, the Governor expressed concern over provisions that could classify Ugandans in the diaspora as foreigners and impose registration requirements on recipients of large transfers.

“For remittances, which sustain the livelihoods of many Ugandans, we are likely to see a decline. Last year alone, we received about US$ 1.5 billion,” he said.

He warned that any disruption to remittance flows would increase pressure on household incomes and the national currency.

The Governor also highlighted the risk of an abrupt exit by foreign investors from Uganda’s government securities market, noting that non-residents currently hold about US$ 3 billion — roughly 12 per cent of the total stock.

“Experience in other jurisdictions shows that such measures can trigger an immediate exit of offshore investors. When they leave, it becomes difficult to fully finance our deficit through borrowing,” he said.

He added that this scenario would force the government to borrow at higher interest rates, raising the cost of debt and tightening credit conditions across the economy.

Atingi-Ego also raised strong objections to Clause 13 of the bill, which criminalises the publication of information deemed to weaken the economy, warning that it could distort financial markets and undermine investor decision-making.

“By criminalising economic research that identifies fiscal instability, the bill undermines what we call price discovery,” he said.

He explained that investors rely on transparent and credible information to assess risk, and limiting such information would increase uncertainty and borrowing costs.

“If I were bidding for a 25-year bond at 17 per cent, I might end up bidding at 20 per cent just to hedge against uncertainty. Why? Because I lack sufficient information,” he said.

The Governor also questioned whether routine central bank communication could fall foul of the proposed law.

“When we publish a report indicating that inflation may rise or the currency could depreciate, would that amount to economic sabotage?” he asked.

https://thecooperator.news/world-bank-urges-uganda-to-exercise-caution-over-sovereignty-bill/

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